Explain to me like I'm 5. Why do so many companies give severence (when fired, not the phenomenal tv series).

While I appreciate its their way of apologizing for laying people off, if we're at will employees the company is under no obligation to do so. I believe there is no such thing as a free lunch so I am trying to figure out what is in it for the company.

Also I hear of people negotiating severence? How does that work since the company holds all the cards?

likefunny
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Even when terminating someone (unless for cause), you want to treat them with respect. When you are terminating people because of lack of work, you want to do what you can to help cushion the blow. It's not the staffs fault that they are being terminated. Also, this former employee will likely be a client someday, and reality is that a reasonable severance package helps prevent ill-will.

likesmarthelpful

To cover this in the 5 year old sense: We are at a pizza party, but it is time to leave. You can take one slice of pizza and one piece of cake with you. No complaining later because I still have some pizza and cake. They didn’t have to send you home with anything, but it helped to get everybody out the door easier.

likefunnysmarthelpful

But what if the person hosting the pizza party wanted leftovers for lunch later? What if we thought it would be a 3 hour pizza party and I'm being asked to leave after 1 hour?

What I was trying to get at is I'm getting more jaded about companies wanting to ✨️do the right thing and treat people humanely✨️. There has to be something for their bottom line. I think the responses of not wanting to make customers think they're out of cash, the flight risk of people left behind, and former employees being clients are the answers I am looking for

likehelpful
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Good to know

If you accept severance the company doesn’t have to pay for unemployment.

This is very state dependent. Most will allow unemployment after severance ends. And if severance is paid in a lump sum you can begin immediately.

And there’s basically no way (especially with professional workers) a company could possibly save unemployment insurance money more than severance costs.

likehelpful

Mainly law and lawsuits reason. In my country, labour laws are weak so companies normally dont pay severance except for American companies.

The no f CVk JK bk u be no FB it
Was FB xx m

Geez, I've been hosed my entire career if enough organizations out there actually pay severance to non-execs that this is a thread. The only severance I've ever received from a layoff was 2 weeks pay or just what I had earned up to that point (current pay period and accrued time). NDA's are standard and I imagine the suit concern varies by legal jurisdiction.

So you can't say they had no real reason to fire you besides being a toxic workplace. It's hush money, clear and simple.

Here's a question for you. What are your thoughts on a company letting people go right before they vest in the 401k plan? Think I might be next based on the executive team's behavior. Same as we've witnessed before others were let go. I'm nearing retirement age & only have a couple of months before being fully vested in a high % match 401k. Would lose about $40k. Legally I have no recourse. Just wondered if anyone has ever negotiated this as a form of severance?

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