By

Shashwat Singh
A0102309189
MBA-HR Class of 2011

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH
SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
Severance Pay

Severance pay is paid to an employee who is involuntarily separated from Federal civilian
employment after completing at least 12 months of continuous service. The amount is computed
using the employee’s rate of basic pay at the time of separation, years of creditable Federal
service, and age, if over 40. It is paid at the same rate and at the same pay period intervals as
regular salary payments unless an employee elects to receive severance pay in a lump sum. The
authority of the Department of Defense to make lump-sum severance payments expires on
October 1, 2010.

Severance pay is money that the employee receives in addition to salary and other monies owed
by the employer when the employment ends after a layoff. A severance package is usually
severance pay combined with benefits such as extended health insurance benefits under COBRA.
It is not compulsory for a company to provide severance pay for a layoff unless there is a
collective bargaining agreement in place or a written contract or agreement that entitles an
employee to severance pay as part of the layoff rights.

Severance packages or pay are normally based on length of service and the current
reimbursement of the employee. Usually the employees must sign a separation or severance
agreement in order to receive severance pay. The agreement typically details the terms of the
layoff and a release clause that prevents the employee from taking legal action against the former
employer.

If there is no other contract or agreement with regard to layoffs and severance pay the employer
usually has the right to request that a severance agreement be signed before the employee may
receive severance payment. However the employer is not allowed to force the employee to sign a
severance agreement by threatening to withhold money already earned by the employee such as
wages.

Concluding Thoughts on Severance Pay

To provide severance pay to a departing employee is both a kindness on the part of the employer
and a legal necessity in this era of law suits. The departing employee receives pay that will
supplement his or her unemployment compensation and cushion his or her standard of living
while job searching.

Since many times a person's employment is terminated through circumstances external to their
work, the provision of severance pay is a positive and supportive gesture. The payment of
severance pay is also viewed as positive by the employees who remain who judge their employer
by his or her actions.
In brief we can say that:

Severance Package

A severance package is a bundled package of financial compensation and benefits which is

offered to some employees when they leave their positions. Some people call severance packages
“golden parachutes,” referring to the fact that they allow former employees to float on their
severance benefits, at least for a while. Such packages may be built into employment benefits in
some companies; teachers, for example, may receive retirement benefits after working a set
number of years. Severance packages are also offered to employees who are laid off, and they
are sometimes used to encourage high paid employees to leave to bring company costs down, in
which case a severance package may be called a golden handshake.

Some common inclusions in a severance package are:

Some common inclusions in a severance package are: stock options, health insurance, life
insurance, compensation pay, pay for unused sick or vacation days, job placement assistance,
and retirement benefits such as those paid into a 401K plan.

{Exact benefits obviously vary, and no benefits can be expected from a company which is going
out of business, whether or not they have been promised.}

Coverage

Full-time or part-time permanent employees, as defined by 5 U.S.C. 5595. Also, fulltime

temporary employees whose temporary appointments are made within 3 calendar days after the
end of a qualifying appointment. Certain employees are not eligible for severance pay -- for
example, employees serving under non-qualifying appointments such as employees with
intermittent work schedules, Executive Schedule employees, Schedule C employees, non-career
SES employees; reemployed military or civilian retirees; individuals separated for misconduct;
and workers’ compensation recipients unless the compensation is being received currently with
pay or is the result of another individual’s death.

There are also limits to eligibility for severance pay -- for example, employees eligible upon
separation for an immediate annuity from a Federal civilian retirement system, including a
reduced annuity (Discontinued Service Retirement), a disability annuity, or a deferred annuity
(MRA + 10 FERS annuity). Eligibility for retired or retainer pay earned as a member of the
uniformed services is also disqualifying.

To further understand Severance pay, we need to get the answer of the few question , answering
them would help us to see a more clear picture of severance pay.
The most frequently asked questions about severance pay are:
Eligibility

1. Who is eligible for severance pay?

In addition to the limitations mentioned above, an employee must have been
serving under a qualifying appointment at the time of separation:
(1) A career or career-conditional appointment in the competitive service or the
equivalent in the excepted service;
(2) A temporary appointment provided it followed service under a qualifying
appointment by not more than three days;
(3) A career appointment in the Senior Executive Service;
(4) An excepted appointment without time limitation, except under Schedule C or
an equivalent appointment made for similar reasons.
In addition, the employee must have been currently employed for a continuous
period of at least 12 months. Also, he or she must not have declined a "reasonable
offer" of another position.

2. What is a "reasonable offer?”

For purposes of entitlement to severance pay, a reasonable offer is:
(1) In the employee's agency and commuting area;
(2) Of the same tenure and work schedule as the employee's current position;
(3) Not lower than two grades or pay levels below the employee's current grade or
pay level.
Furthermore, the offer must have been made in writing and the employee must have also met the
established qualification requirements. (See 5 CFR 550.703.) A reasonable offer for purposes of
severance pay eligibility under 5 CFR 550, subpart G, is not affected by an agency’s decision to
waive or modify qualifications to make the placement.

3. Who determines whether an employee is entitled to severance pay?

The separating agency makes this determination.

4. Under what circumstances may employees who resign before being involuntarily
separated be treated as “involuntarily separated” for purposes of qualifying for
severance pay?
Under current severance pay regulations, employees who resign because they
expect to be involuntarily separated are considered to have been involuntarily
separated for severance pay purposes ONLY IF they resign after receiving:

(1) a specific written notice stating that the employee will be involuntarily
separated by a particular action (e.g., reduction in force (RIF)) on a particular date;
or
(2) a general written notice of RIF or transfer of function, under 5 CFR 550.706,
that announces that ALL positions in the competitive area will be abolished or
transferred to another commuting area by a particular date.
However, if the specific or general notice is canceled before the resignation is effected, the
resignation would not be qualifying for severance pay purposes. If the specific notice deals with
involuntary separation by RIF procedures, the notice must meet the conditions in 5 CFR part
351, subpart H. A general notice has no standing under the RIF program and is not subject to RIF
rules. Therefore, a general notice cannot be used to meet the RIF notice requirements in 5 CFR
part 351, subpart H.
A Certification of Expected Separation under 5 CFR 351.807 is not a qualifying specific or
general notice under the severance pay regulations. Entitlement to certain benefits--such as
training assistance, priority placement rights, appeal rights, etc.--may be affected by an
employee's decision to resign in advance of an actual involuntary separation action. The
employing agency should inform affected employees of these implications before they accept a
resignation.
Even if a resignation is considered an “involuntary separation” under the severance pay rules, the
employee may not be eligible for severance pay under 5 U.S.C. 5595 and 5 CFR part 550,
subpart G, for other reasons. The employee must meet all applicable eligibility requirements
described in 5 CFR 550.701-550.714.

5. What exactly constitutes a qualifying “general notice” under 5 CFR 550.706?

A general notice is a written notice which states that (1) all employees in the affected
competitive area will be terminated due to abolishment of their positions, or (2) all positions in
the affected competitive area will be transferred to another commuting area as part of a transfer
of function. The notice must state the specific date by which all positions are scheduled to be
abolished or transferred (no more than 1 year after the date of the notice.) (EXAMPLE: “All
positions in this competitive area will be abolished no later than [insert date].”) It should also
expressly state that a resignation after receipt of the notice will constitute an involuntary
separation for severance pay purposes, as long as the notice is not canceled prior to the effective
date of the resignation. The general notice must be distributed to all employees in the affected
competitive area. (See 5 CFR 351.402 for definition of “competitive area.”)

NOTE: A general notice may not be used to effect an employee's separation. To effect an
employee's separation, a specific written notice must be issued to the employee in accordance
with applicable statutory and regulatory requirements. Thus, in the case of a RIF separation, a
60-day minimum notice period is generally required.

6. Does a person who has been separated from Federal service lose his or her severance pay
if he or she refuses a "reasonable" job offer under the Priority Placement Program (PPP)?
The person does not lose his or her severance pay, but his or her name will be removed from the
PPP. Once vested, an employee’s severance pay is not affected because he or she is no longer an
"employee." An employee is defined as "an individual employed in or under an agency."
However, if an employee refuses a reasonable job offer, as defined under 5 CFR 550.703, prior
to being separated, he or she would lose his or her entitlement to severance pay.

7. Does an employee who had two temporary appointments after being separated from a
full-time career appointment meet the definition of "qualifying appointment" for severance
pay purposes?
Yes, in cases where a temporary appointment follows service under a qualifying appointment by
not more than 3 days, the employee meets the definition of "qualifying appointment." His or her
severance pay will be determined on the basis of his or her rate of basic pay at the time of
separation, age, and years of creditable service.

8. If a career employee on a permanent position voluntarily accepts a time-limited position,

is he or she eligible for severance pay upon the termination of that temporary
appointment?
Yes. An employee, serving under a qualifying appointment, is entitled to severance pay. A time-
limited appointment is deemed qualifying when entered within 3 calendar days after the end of
another position designated as qualifying as defined under 5 CFR 550.703.

9. If an employee resigns, will he or she be entitled to severance pay?

Generally speaking, a resignation is a voluntary separation and would not entitle an employee to
severance pay (see question 4). However, resignation is considered involuntary for purposes of
severance pay, (provided the employee has not declined a reasonable offer in the agency before
separation) if the employee received a specific notice in writing from his or her agency that he or
she is to be involuntarily separated and the notice of separation is not canceled before the
resignation is effected. Separations (terminations) due to misconduct, delinquency or inefficiency
do not confer severance pay entitlement.

Other Compensation

10. If entitlement to an immediate annuity at the time of separation is a bar to severance

pay, is severance pay discontinued if the employee becomes entitled to an annuity
beginning at some later time?
Entitlement to an annuity beginning at a later time has no effect on an employee’s entitlement to
severance pay. However, retroactive entitlement could result in an overpayment of severance
pay.

11. Members of the Retired Reserve are not eligible for reserve retired pay until age 60. If
an employee who is a retired reservist is involuntarily separated from his Federal position,
but he has not yet attained the age for reserve retired pay, is he eligible for severance pay,
providing he meets the other eligibility requirements?
Yes. Unless an employee is eligible to receive immediate payments from a Federal annuity (even
if he has chosen to defer such payment), he or she is eligible for severance pay.

12.What impact occurs when an employee starts drawing severance pay but later
becomes entitled to a disability annuity?
Since the disability annuity will be retroactive to the date of separation from the service, the
employee will have to return all severance pay received.

13. Is entitlement to unemployment compensation a bar to severance pay?

No. However, entitlement to severance pay has a bearing on unemployment compensation. An
employee should check with his or her state unemployment office.

14. May an employee separated through RIF, receiving workers' compensation at the time
of separation, begin to receive severance pay at the time the workers’ compensation ends?
No. The employee is not entitled to severance pay because the employee was receiving workers'
compensation at the time of separation. However, the employee may request that the workers'
compensation be interrupted and the severance pay begun at the time of separation. When the
severance pay entitlement ends, the employee may then reapply for the workers' compensation.
If the employee still qualifies for workers’ compensation, those payments may be
resumed.

15. An employee, affected by RIF, is entitled to severance pay and continuation of health
insurance benefits. Should the employee’s share of his health insurance premium be
deducted from severance pay?
No. Under 5 CFR 550.709, the only deductions to severance pay are for income
and Social Security taxes.

16. Is severance pay, and the period covered by the severance pay, creditable for
retirement or leave accrual purposes?
No, when a person receives severance pay, he or she is no longer a Federal employee.

17. May an employee accept other employment and still receive severance pay?
Yes, unless the new employment is in the Federal service. Severance pay will not begin if an
employee is reemployed in another permanent position before separation. If an employee entitled
to severance pay later accepts a position with the Federal Government or the government of the
District of Columbia, the employee is no longer eligible for severance pay and severance pay
terminates unless employed under a non-qualifying time-limited appointment.
If an employee entitled to severance pay accepts a temporary appointment within 3 calendar days
following a qualifying appointment, the employee’s entitlement to severance pay terminates.
When the qualifying temporary appointment ends, severance pay is triggered by the involuntary
separation resulting from the expiration of the time-limited appointment. The rate of basic pay
earned in the temporary job is used to determine the employee’s severance pay, and the
payments are made by the activity employing the individual under the qualifying time-limited
appointment.
If an employee entitled to severance pay is employed under a non-qualifying time limited
appointment, severance payments are suspended during the appointment.
Severance pay resumes when the employee separates from the non-qualifying time-limited
appointment. The activity that originally separated the employee involuntarily is responsible for
the payments.

18. If an employee receives severance pay in a lump sum payment and is subsequently
reemployed by the Federal Government within the timeframe covered by the severance
pay, is he or she liable to the Government for any overpayment of severance pay?
Yes. Under a lump sum payment, the employee must repay to DoD an amount equal to the
amount of severance pay applicable to the period from the start of Federal reemployment to the
end of the calculated severance pay period.
Employee Satisfaction

Employee satisfaction is a measure of how happy workers are with their job and working
environment. Keeping morale high among workers can be of tremendous benefit to any
company, as happy workers will be more likely to produce more, take fewer days off, and stay
loyal to the company. There are many factors in improving or maintaining high employee
satisfaction, which wise employers would do well to implement.

To measure employee satisfaction, many companies will have mandatory surveys or face-to-face
meetings with employees to gain information. Both of these tactics have pros and cons, and
should be chosen carefully. Surveys are often anonymous, allowing workers more freedom to be
honest without fear of repercussion. Interviews with company management can feel intimidating,
but if done correctly can let the worker know that their voice has been heard and their concerns
addressed by those in charge. Surveys and meetings can truly get to the center of the data
surrounding employee satisfaction, and can be great tools to identify specific problems leading to
lowered morale.

Many experts believe that one of the best ways to maintain employee satisfaction is to make
workers feel like part of a family or team. Holding office events, such as parties or group
outings, can help build close bonds among workers. Many companies also participate in team-
building retreats that are designed to strengthen the working relationship of the employees in a
non-work related setting

Definition:

Employee satisfaction is the terminology used to describe whether employees are happy and
contented and fulfilling their desires and needs at work. Many measures purport that employee
satisfaction is a factor in employee motivation, employee goal achievement, and positive
employee morale in the workplace.

Employee satisfaction, while generally a positive in your organization, can also be a downer if
mediocre employees stay because they are satisfied with your work environment.

Factors contributing to employee satisfaction include treating employees with respect, providing
regular employee recognition, empowering employees, offering above industry-average benefits
and compensation, providing employee perks and company activities, and positive management
within a success framework of goals, measurements, and expectations.

Employee satisfaction is often measured by anonymous employee satisfaction surveys

administered periodically that gauge employee satisfaction in areas such as:
  management,
 understanding of mission and vision,
 empowerment,
 teamwork,
 communication, and
 coworker interaction.

The facets of employee satisfaction measured vary from company to company.

A second method used to measure employee satisfaction is meeting with small groups of
employees and asking the same questions verbally. Depending on the culture of the company,
either method can contribute knowledge about employee satisfaction to managers and
employees.

Exit interviews are another way to assess employee satisfaction in that satisfied employees rarely
leave companies.