Definition

voluntary severance package

Part of the Business terms glossary:

A voluntary severance package is a financial incentive that’s offered to an employee in hopes that he will resign or retire. Unlike most severance packages, a voluntary severance package gives the employee the option to decline the offer.

 Generally, voluntary severance packages are offered at a time that will benefit the company by reducing the workforce and cost of salaries and benefits. High-earning long-term employees who are close to retirement age may be offered early retirement packages, for example, in the hopes of forestalling layoffs.  Because a voluntary severance package benefits both the employer and the employee who accepts the package, it is sometimes referred to as a "golden handshake." 

The golden handshake is closely related to the golden parachute, which is a severance agreement that provides an executive with a substantial package upon termination, usually in advance of some event that might have a less favorable outcome for the executive, such as an acquisition, a merger or a breaking scandal.  

Golden handcuffs refer to a different type of agreement, in which employees are effectively shackled by financial incentives designed to motivate them to stay with a company longer than they might otherwise do. 

This was last updated in July 2013
Contributor(s): Ivy Wigmore
Posted by: Margaret Rouse

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