6 Best Ways to Design an Employee Severance Package

It’s never easy to let someone go. Designing a suitable severance package helps facilitate communication on both ends. It can also prevent a dismissal from turning into a contentious and expensive legal dispute.

“You want to make yourself as sure as possible about what you owe an employee,” says London, Ontario-based labor and employment lawyer Jodi Gallagher Healy.

A severance package is the compensation that an employer provides to an employee who is laid off. Consider the six best ways when designing an employee severance package. So, let’s jump right into this insightful blog to grab the entire procedure.

Utilize Employment Contracts

Before an employee begins work, it is an excellent move to have them sign a personalized employment contract that specifies what they would be paid upon termination.

Get a lawyer to evaluate your contract templates regularly because the law is subject to change. So, with their assistance, you must draft carefully to safeguard your company’s interests.

Think About a Reasonable Notice

Employees without an employment contract may be eligible for “reasonable notice.” Reasonable notice is more lenient than provincial minimum guidelines and depends on the specific factors such as the employee’s years of service, position, and age at the time of termination.

Older workers and those with more years of service will often be eligible to a lengthier period of reasonable notice. A lawyer can provide a range based on similar circumstances and recommend multiple severance packages.

According to Gallagher Healy, “a judge may rule that the person is eligible to 6 months or 8 months. That way, you will be sure what you owe an employee.

Terminate Employee Due to a Reason

If you’re firing an employee “for cause” (for example, willful misbehavior, disobedience, or lack of duty), you may not need to pay that employee anything upon termination.

Be cautious that “just cause” is extremely challenging to prove. You need solid evidence of a long history of major performance issues that have been discussed with the employee. Also, the provision of warnings or a single serious event that causes a fundamental breakdown in the employment relationship is a must.

Meet the Provincial Standards

If you are not terminating “for cause,” ensure that your severance payment meets the necessary employment standards in your province, territory, or federal jurisdiction (whichever applies).

Each jurisdiction has its own set of rules for how much early notice of termination you must provide to the employee, as well as other requirements.

Fill the pot with Other Perks

You might put extras in the severance package offer to make it more appealing to the employee and prevent them from suing. For instance, you can provide outplacement services to assist them in finding another job opportunity.

You can also give them time off so they can attend job interviews during the notice period. Additionally, providing a recommendation letter is usually an appreciable and positive gesture from your end.

Let Employee Sign a Release

You may be able to let the employee to sign a release of any claims pertaining to employment tenure for you. (You should speak with a lawyer regarding specifics.) You can feel more at ease with unresolved legal matters after signing a release.

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