| Pic: IMAGESBAZAAR |
A good severance package has become a crucial parameter during job search, as it helps sustain finances (though temporarily) if unemployment is to befall at any point
A severance package is basically the consolation prize that a professional receives on leaving a company. The package may typically contain monetary benefits, material advantages or both. Another term, which companies have come to associate with the same is the ‘golden parachute', which is reserved for the elite and upper echelon employees.
Anurag Poddar, CEO, Presto Wonders tells us the benefits usually contained in a severance package, "The amount of money received is usually based on the length of employment prior to the termination, and may include payment for unused vacation and sick days, and unreimbursed business expenses. Other continued benefits that may be offered or negotiated include life insurance, disability insurance and the use of company property such as a laptop, cell phone or vehicle. Companies may also offer outplacement assistance to help the former employee find a new job."
The ‘golden parachute' is however different from a usual severance package. Ashish Arora, founder & MD, HR Anexi, explains, "The golden parachute is a specially designed severance package for leaders/senior executives of the organisation. The past couple of years of the economic crisis have made it increasingly difficult for organisations to attract top talent on account of uncertain economic conditions, thus changing business dynamics and risk averseness of key employees who have generally preferred to stay in their current organisations rather than seeking out newer and challenging opportunities outside. Thus, the golden parachute tends to reduce the risk of these conditions by packaging and presenting across the table the severance packages that a top executive would be eligible for - in case the new opportunity doesn't work in his/ her favour."
But, why should an employer provide the "leaving" employee a severance package at all? Poddar answers, "Technicalities and laws apart, a severance package is given as a goodwill gesture because of the symbiotic relationship the employee and employer share. An employee who has been working a long time and laid-off due to some situation deserves a severance package. In addition to some employers feeling that this is the right thing to do in regards with rewarding the employee's loyalty and hard work, it often softens the blow that can come with termination and can discourage a former employee from pursuing a lawsuit against the company. As for the second scenario, employers may be legally required to provide terminated employees with severance pay if they led their employees to believe that they would be paid severance."
Arora tells us the importance of a severance package for professionals today, "The past couple of years have seen an increased awareness of severance packages and golden parachutes and hence, professionals are quite vocal and keen to understand and have them as a part of their employment terms. This has indeed become a must-have in senior management employment conditions today. This enables these professionals to maintain their standard of living as well as help them focus on their professional/career priorities rather than emotional or economic ones during times of a job loss. Professionals realise the importance of such packages, which insulate them from such situations."
Thus, severance has indeed gained widespread popularity and importance among professionals today.
- Palak Bhatia