Question

1. How do one calculate severance pay and when are they due?

Answer 1

1. For Hourly Wage Employee

Severance is calculated according to length of tenure with the company. For hourly wage workers, employee received one week of pay for each year of services. If employee worked for a company for 10 years, then he would get 10 weeks of pay at current rate.

Example: Alan has worked for Company XYZ for 10 years. His current hourly wage rate is $ 20.00 and he worked for a 8 hours a day, 5 days a week.

Weekly Wages = 20*8*5 = $ 800

He would get 10 weeks of salary as a severance as he worked for 10 years with XYZ.

Severance Amount = 10 * 800 = $8000.

2. Salaried Employees

Salaried employees offered 2 weeks's pay for each year of service as a severance.

Example: Bob was a salaried employee for Company ABC for 5 years. He earns $ 26000 a year.

Bob's weekly Salary = 26000 /52 = $500.

Severance per year = 500 *2 = $ 1000.

He worked for 5 years

Total Severance = 1000*5 = $5000

Severance has offered at the time of termination. It may be paid as a lumpsum or in installment.