Severance Pay

Severance pay, also known as termination pay, is a form of lump-sum compensation which is paid by an employer to a worker who has been involuntarily laid off. Typically severance pay is linked to the number of years the worker has been employed in one factory. In some production countries, severance is mandated by law; while in others, it is either voluntary or provided for through collective bargaining. Severance pay is vital because it forms a buffer for workers to be able to pay their bills and keep their kids in school while looking for a new job. Many production countries which mandate severance pay by law lack robust social security systems to help keep workers afloat between jobs. Employers should therefore protect severance pay as a right, and brands should ensure it is paid, but in reality many workers do not receive the money owed to them.