{"id":4759,"date":"2016-04-04T10:47:41","date_gmt":"2016-04-04T15:47:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/employment-law-and-human-resources\/severance-pay-laws-does-it-make-sense-to-offer-severance-pay.html"},"modified":"2024-06-06T05:30:36","modified_gmt":"2024-06-06T10:30:36","slug":"severance-pay-laws-does-it-make-sense-to-offer-severance-pay","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/employment-law-and-human-resources\/severance-pay-laws-does-it-make-sense-to-offer-severance-pay.html","title":{"rendered":"Severance Pay Laws: Does It Make Sense to Offer Severance Pay?"},"content":{"rendered":"\n
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Severance Pay Laws: Does It Make Sense to Offer Severance Pay?<\/h1>\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Susan Mills Richmond, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Small businesses and large companies must face the day they must let go of employees. Sometimes, it’s for good cause \u2014 the departing employee wasn’t a good fit or can’t move with the company. Sometimes, it’s economics, and layoffs are necessary for your business’s survival. In these cases, business owners may want to make the transition easier for their former employees.<\/p>\r\n

Surprisingly, there are no state or federal severance pay laws. Employers can hand workers their pink slips and final paychecks and show them to the door. There are no legal requirements to offer severance packages. Most employers offer their workers severance pay when they can.<\/p>\r\n

Sometimes, small business owners must give their employees some termination payments. Sometimes, severance pay is a way to protect yourself from legal action. This article reviews both circumstances and what business owners should remember when creating a severance policy.<\/p>\r\n

When You Must Give Severance Pay<\/h2>\r\n

In 1988, responding to a wave of layoffs at auto plants and other industrial facilities, Congress passed the Worker Adjustment and Retraining Notification Act (WARN)<\/a>. This law applies to any business with over 100 employees and requires companies to give workers at least 60 days’ notice of an impending shutdown.<\/p>\r\n

As of March 2024, 18 states<\/a> have similar laws called "mini-WARN Acts." State laws apply to businesses with fewer employees, including small businesses. Most of these laws do not require severance pay<\/a>, although employers must give workers their final paychecks at the time of the layoff.<\/p>\r\n

An employer must only offer a severance package when the employment contract or company policy states that terminated employees will get one. Situations where you may have to provide a severance payment include:<\/p>\r\n