severance
SEV-er-unss
/ˈsevərəns/
An amount paid to an employee upon termination of employment, usually in the case of layoffs.
Severance is usually paid when the job loss is not the employee's fault (like a company closing). It is a 'bridge' to help them until they find a new job.
The story behind the word. The word comes from 'sever,' meaning to cut. When you leave a job, the legal and financial bond between you and the employer is 'severed' or cut. The payment is meant to soften the blow of that sudden separation.
Word relationships
- redundancy pay: Redundancy pay is the specific term used in the UK and Australia for severance due to a job being eliminated.
Commonly confused with
- pension: Severance is a one-time payment for leaving; a pension is a lifelong payment for retiring.
Word family
- sever (verb): To cut off or end a connection.
Collocations
- severance pay
- severance package
- severance agreement
- severance benefits
Example sentences
- "The departing CEO received a severance package worth five million dollars." A corporate restructuring news report.
- "Employees with over five years of service are entitled to three months of severance pay." A standard employment contract clause.
Memory hook
SEVER-ance: It's the money you get when the company SEVERS (cuts) the tie with you. Pay for the cut.
When not to use
Do not use 'severance' if an employee is fired for misconduct; they are usually not entitled to it.
Fun facts
- In some countries, severance pay is a legal requirement based on how many years you worked.
- The largest severance packages are often called 'Golden Parachutes.'
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