What You Can Expect From A Severance Package

fashion unemployment, fashion layoffs, job loss, career transition, career reboot, laid off in fashion industry

Losing one’s job is not something any of us like to think about. It is in your best interest to know what your legal rights are and what your are owed if terminated. Receiving a pink slip can sometimes come unexpectedly. Employees can be overwhelmed with emotion at the time to fully understand or grasp the terms and conditions being offered to them at the time in terms of a severance package if one is offered. After the shock has worn off you are likely to be left with many questions. In this article I am going to go over what a severance package is, what it typically includes, and what you should do.

Severance pay in the United States is typically between one to two weeks of pay for each year of service. For executives, it can be even higher up to a month for each year of service! As you can see, this can mean hundreds of thousands of dollars worth of money and benefits in your pocket. This is not a small amount to turn your nose up to.


We couldn’t cover every possible angle on dealing with a job loss in just one post! This article is part of a 6 part Fashionable Career Reboot blog series. If you want to learn more about how to make the most out of a job loss, you can read the entire series by going to the bottom of this page and clicking on the article you are interested in. If you know someone else who would be interested in this article or blog series please feel free to share! You can also join the conversation on our Facebook group called PickGlass Fashionable Careers. See you there!


What Is A Severance Package Exactly? 

A severance package is pay and benefits given when an employee leaves a company unwillfully. It is most commonly offered to employees who are laid off or when they retire. When provided, it is given as either a lump sum or paid over a period of time. A severance package may also include health insurance coverage for a certain period of time and continuation of other employee benefits coverage.

However, it is NOT mandatory. Severance pay is totally up to the goodwill of the employer unless the employer is obligated to pay by an employment contract or by a severance policy stated in writing. Policies for severance packages are often found in a company’s employee handbook. I highly recommend you familiarize yourself with your company’s policy. 

Severance History

As mentioned, no law requires an employer to pay severance pay. The Fair Labor Standards Act (FLSA) requires that an employer pays an employee whose employment has been terminated their regular wages through their completion date and for any time that the employee has accrued. While time accrued would include vacation time, it would not normally include sick days.

In all instances of employment termination, the employer is required by law to offer COBRA. That means COBRA must be offered to employees and their families who lose their health benefits due to unemployment, the right to continue group health benefits provided by their group health plan. Employees can then choose whether to continue coverage. Of course you have the option to waive your right to COBRA, but it must be offered.

That being said, employers may require the employee to pay the entire health insurance premium for health care coverage. So read your contract carefully!

What Can You Expect To Receive In A Severance Package?

Most employers will explain their methodology when providing severance packages. They will provide an overview of how your individual severance pay was calculated. 

Typical Agreements include:

  • Your severance pay terms
  • Your vacation pay terms
  • Cobra (Benefits) Information
  • Return of Property
  • Non-compete Clause
  • Confidentiality Agreement
  • Unemployment Information
  • A General Release of Claims and Covenant Not To Sue

In addition to any remaining regular pay, severance may also include some of the following benefits:

  • By law, you are due compensation up to the date of your termination
  • You are owed any accrued wages
  • Any additional payment based on months of service
  • Payment for unused accrued PTO (paid time off), vacation time, holiday pay, or sick leave.
  • Commission, Bonus, and deferred compensation payouts due
  • A payment in lieu of a required notice period.
  • Medical, dental or life insurance to continue for a set period of time.
  • Rights under a pension, profit sharing, and 401(k) plan or 403(b) benefits
  • Stock option statement and exercise schedules
  • Restricted stock and acceleration schedules
  • Loan Repayment terms
  • Unreimbursed business expenses
  • Assistance in searching for new work. This might include access to employment services or help in producing a résumé.

What’s The Catch?

Why would a company offer a severance package to an employee if they are not required to by law? The main reason is employers recognize how difficult layoffs are on both affected workers and retained employees. It is not an action taken lightly. Any type of layoff can mean a dip in company culture or employee moral. Most companies want to make the transition easier for all parties involved. 

For this reason, over 70% of U.S. companies will offer outplacement services via a third party to help employees search for new employment. Outplacement services can help professionals with resume writing and editing, interviewing prep, networking services, and even new skill training.

Many companies have found that offering assistance to employees to find new employment as a win-win situation. When people find swift new employment they are happier. They will not bad talk the old company, and the old company end up paying less in unemployment and healthcare.

Read The Fine Print

However, employers do not offer plum packages out of the kindness of their hearts. Severance agreements are more than just a “thank you” payment from an employer. They come with strings. By signing the contract, you are agreeing to your old company’s terms and conditions before you can receive your benefits. Is it extremely important to read the severance contract very carefully. 

Some severance contracts stipulate that employees will not sue the employer for wrongful dismissal or attempt to collect on unemployment benefits. In such a case, the employee is being asked to waive any right to pursue a legal claim against the former employer. If they do so, they must return the severance money.

Companies like to keep their reputation in tact. It is not uncommon for severance agreements require employees to sign paperwork saying they will not speak negatively about the company. 

Other severance contracts could prevent an employee from working for a competitor, known as a noncompete clause. Depending on the industry you work in, this clause could lower the job pool of future employers. Thus, extending the time it takes you to find new work. A non-compete clause usually give a scope, geographic limitations, or timeframe. 

Am I Eligible For Unemployment?

Yes. Employees who have been terminated due to a workforce reduction are eligible. Most agreements include the key information you need to apply for unemployment. However, most states don’t allow you to collect unemployment while you are also collecting severance pay. Be sure to check with your local unemployment agency for specific information. Look for contact information and instructions on how to apply in your agreement.

Do You Need An Attorney?

In most cases the answer is no. However, employees have many rights to fair employment and you should know if they apply to your situation.

People over 40 are protected by the Age Discrimination Employment Act (ADEA). To comply with legal requirements, employers must provide information confirming that age was not a factor in their termination.

If you feel that you were unfairly let go, or that you are owed additional compensation an employment attorney can be contacted to assist in the evaluation and review of your severance agreement. 

Fashionable Career Reboot Series

fashion unemployment, fashion layoffs, job loss, career transition, career reboot, laid off in fashion industry

If you found this article helpful, or know someone who would, I encourage you to read and share the entire Fashionable Career Reboot Series. It covers everything you need to know about making the most out of a job loss. You can read and share the entire series here: