A severance package is the contracted pay and benefits provided to an employee whose job is terminated.
Severance agreements specify what will be provided, as well as terms and conditions under which the employee might forfeit some or all of his rights. Money and benefits in a severance package might include:
- Pay in lieu of notice.
- Pay based on term of employment or the expected period of unemployment.
- An extension of medical and dental benefits for a specified time period.
- Stock options.
A voluntary severance package offered as an incentive for an employee to retire prematurely is sometimes referred to as a golden handshake.