severance pay

noun

|Updated on: 9 Aug 2018

Definition of severance pay

: an allowance usually based on length of service that is payable to an employee on termination of employment

Recent Examples of severance pay from the Web

Still, will private equity firms be on the hook in the future for severance pay in other bankruptcies and liquidations?

— polina marinova, Fortune, "Term Sheet -- Tuesday, July 10," 10 July 2018
The department’s highest expense was coaching salaries at just more than $17 million, not including more than $5 million in severance pay for former football coach Bob Diaco.

— kelli stacy, courant.com, "A Look At UConn's Top Teams' Attendance, Revenue And Expenses," 10 July 2018
The $14 million figure was paid out over a seven-month period and appears to include about $13 million in bonus or severance pay.

— peg brickley, WSJ, "Struggling For-Profit School Operator Was Generous to Top Executives," 5 July 2018
Liuzzi will receive $433,500 in severance pay, plus 7,100 shares worth a little over $250,000, DNB said.

— joseph n. distefano, Philly.com, "Two top execs out at DNB First, Chester County's biggest bank," 11 June 2018
The day before the Fourth of July, Barnes & Noble issued a vague press release announcing that the ailing company’s chief executive, Demos Parneros, had been fired, effective immediately and without severance pay, and removed from its board.

— alex shephard, The New Republic, "Is Barnes & Noble Too Big to Fail?," 6 July 2018
Earlier this month, many employees protested the lack of severance pay in areas including New Jersey and New York, according to CNN.

— karen mizoguchi, PEOPLE.com, "Toys 'R' Us Will Close All of Its Doors Forever This Friday After More Than 70 Years," 25 June 2018
The Bradley Center board last year approved a pool of $100,000 in bonuses and up to 20 weeks in severance pay for key full-time employees.

— james b. nelson, Milwaukee Journal Sentinel, "Many long-time Bradley Center workers will not have jobs at the new Bucks arena," 11 May 2018
Those affected will receive severance pay and aid such as financial counseling, the company said.

— deon roberts, charlotteobserver, "Mortgage company layoffs hit Charlotte," 31 May 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'severance pay.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of severance pay

1943

in the meaning defined above

See Words from the same year

NEW! Time Traveler

Financial Definition of SEVERANCE PAY

severance pay

noun

What It Is

Severance pay refers to a payment from a company to an employee who is being discharged.

How It Works

Under certain circumstances, employers compensate an employee who is being discharged with a sum of money called severance pay. The specific amount may be related to the employee's salary and length of time with the company. In most cases, severance pay is paid to an employee who is being laid off due to internal changes within a company.

To illustrate, suppose Bob is one of two internal accountants for company XYZ. Due to restructuring, XYZ now needs only one accountant, and Bob's position is subsequently eliminated. Bob is laid off, as a result, and is given severance pay by XYZ when he leaves.

Why It Matters

In many cases, employees are made to leave a given company due to internal changes that eliminate their jobs. Severance pay is a compensatory measure that ensures that laid-off employees are compensated fairly not only for work done since their last pay cycle, but also for covering any expenses that may be incurred through no fault of their own between the time they leave their current job and find another position.

Source: Investing Answers