A severance benefit plan is the employee separation package worked out between the employer and the employee in event of departure of the respective individual from the company. Many a company these days have formulated standard severance benefit plans to standardize the employee separation process but in case of specific departures such as top management these packages are custom made and structured after detailed negotiations with the personnel concerned.
A well worked out severance plan may consist of components such as some payout based on the duration of the service of the employee, compensation for unused leaves, insurance, and retirement benefits, stock options apart from the regular salary benefits that the employee is entitled to. The importance of a well-designed separation package even increases manifolds given the fact that concerned employee would be out of the job looking for new assignment and this package would serve as a strong support in this time of need of the employee.
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