When and why do companies offer severance packages in Florida?

Layoffs can be a stressful experience whether an employee experiences it alone or together with colleagues. After spending time establishing roots in a company, an employee has to uproot their career life and start the job-hunting process. If they’re lucky, they may get a suitable job offer soon after, but this isn’t always a guarantee.

Luckily, some employees have a severance package to sustain them while they’re between jobs. Even though Florida law does not mandate employers to provide employees they lay off with severance pay, some companies have this policy. Employees can benefit from understanding why and when companies offer severance packages.

What is a severance package?

By definition, a severance package is a payment an employer makes to an employee upon the termination of their employment contract. Depending on the company, this package may include:

• Several months of salary
• Continuation of health insurance benefits
• A bonus
• Stock options
• Outplacement services

Companies that offer severance packages do so to ease an employee’s career transition to their next employment. Severance packages can also help a company mitigate potential legal risks that may arise from the termination of an employment contract.

Even though the Sunshine State is an at-will employment state, and employment relationships can be terminated without notice, cause or explantation, severance pay is a common practice.

When and why are severance packages offered?

Even though layoffs are the most common, employment contracts can be terminated for many reasons. Some employees may have to be let go when a company is reducing its workforce during economic downturns. In this case, businesses use severance pay as a gesture of goodwill and to maintain a positive reputation.

Employment contracts can also be terminated during an internal company restructuring or following a merger or acquisition. The company may offer severance pay to employees whose roles are eliminated during the reshuffle to maintain morale among the remaining employees.

Following performance evaluations, some employees may be laid off due to performance issues. In such instances, a company may use severance pay to avoid potential legal disputes. A company may also use severance pay as an incentive for voluntary resignation in an employee’s early retirement plan.

A reasonable severance package can make a world of difference for someone who is suddenly out of work. With the guidance of a trusted legal team, employees whose employment contracts have been terminated can better transition to their next job.