Understanding severance pay when you resign: what chief human resources officers need to know

What is severance pay and how does it usually work

Defining Severance Pay in the Employment Landscape

Severance pay is a financial benefit that companies may offer to employees whose employment ends, typically due to layoffs, restructuring, or other forms of involuntary termination. It is not always guaranteed by law, but it is often outlined in an employment agreement or company policy. Severance packages can include a lump sum payment, continued health insurance, and other benefits, depending on the employer's practices and the employee's length of service.

How Severance Packages Are Structured

Severance packages vary widely across industries and companies. Some organizations offer severance as a set number of weeks' pay for each year of service, while others may provide a flat amount. The payment can be delivered as a lump sum or in scheduled installments, and may include additional benefits such as outplacement services or extended health insurance coverage. The timing of severance payments often aligns with the company’s regular payday or may be paid out within a certain number of calendar days after termination.

Key Factors Influencing Severance Offers

• Company Policy: Many companies have formal policies that dictate when and how severance is paid.
• Employment Law: State laws and employment law regulations can impact whether severance is required and how it is calculated.
• Employment Agreements: Executives and senior leaders, such as chief human resources officers, often have severance terms detailed in their contracts.
• Negotiation: Severance can sometimes be negotiated, especially for high-level employees or in cases of potential legal claims, such as wrongful termination.

Why Severance Matters for HR Leaders

For chief human resources officers, understanding the nuances of severance pay is critical. Not only do you help design and implement severance packages for employees, but you may also need to negotiate your own exit terms. Severance agreements can protect both the company and the employee by resolving potential legal issues and providing a smoother transition. Additionally, severance packages can influence employer reputation and employee morale, making it essential to approach these discussions with care and expertise.

Severance is also closely linked to broader topics such as tax risk management in corporations, which can directly impact the chief human resources officer role. For a deeper dive into how these financial and legal considerations intersect, explore this resource on tax risk management in corporations.

Do you get severance if you resign: the standard practices

Severance Pay When You Resign: What’s Typical?

When it comes to severance, most people associate it with layoffs or involuntary termination. However, the situation is different if you resign from your employment. In general, companies are not legally required to offer severance pay to employees who choose to resign. Severance packages are usually designed to support employees who lose their job through no fault of their own, such as during a reduction in force or company restructuring.

Standard Practices Across Companies

While there is no universal rule, some organizations may still offer severance to employees who resign, especially at the executive level. This can depend on several factors, including:

• The terms of your employment agreement or contract
• Company policy and past practices
• State laws and local employment law requirements
• Length of service and your role within the company

For chief human resources officers, it’s not uncommon to see negotiated severance agreements that outline what happens in the event of resignation. These agreements may specify a certain number of weeks severance, continued health insurance, or other benefits as part of the severance package. The details can vary widely, so it’s important to review your employment agreement and company policies carefully.

What to Expect in Terms of Payment

If severance is offered after resignation, it may be paid as a lump sum or in scheduled payments over a set number of calendar days. The severance package might include salary continuation, unused vacation days, or extended benefits. However, most companies reserve the right to offer severance at their discretion, unless otherwise required by law or contract.

Negotiating Severance When You Resign

Even if your employer does not automatically offer severance pay upon resignation, there may be room to negotiate severance, especially if you have leverage or potential legal claims. For example, if your resignation is the result of a constructive dismissal or other workplace issue, you may have grounds to negotiate a severance package. Consulting with an employment attorney can help clarify your rights and options.

For more on managing your exit and the transition process, you may find this resource on how to effectively manage backfilling a position as a chief human resources officer useful.

Legal considerations for severance upon resignation

Key legal factors in severance after resignation

When a chief human resources officer considers resignation, understanding the legal landscape around severance pay is essential. Unlike termination, where severance packages are more commonly offered, resignation typically does not guarantee severance payments. However, there are important legal nuances and exceptions that can impact whether an employee is eligible to receive severance, and how much they might be paid.

• Employment agreements: Some CHROs have employment agreements that specify severance terms, even in the case of voluntary resignation. Reviewing these documents is crucial, as they may outline scheduled severance payments, lump sum options, or continued benefits such as health insurance.
• State laws: Severance pay is not mandated by federal law in the United States, but certain state laws or local regulations may influence severance practices. For example, some states require payment of accrued vacation days or other benefits on the final payday, which can be part of a broader severance package.
• Company policy: Many companies have internal policies that address severance packages for employees who resign. These policies may differ for executives, including CHROs, and can affect the negotiation process. It’s important to confirm whether the company typically offers severance or benefits after resignation.
• Legal claims and releases: Employers may offer severance as part of a severance agreement in exchange for a release of potential legal claims, such as wrongful termination or disputes over employment law. Even after resignation, this can be a factor if there are concerns about legal exposure for either party.
• Timing and notice: The amount of notice given before resignation can impact eligibility for severance. Some agreements require a specific number of calendar days’ notice to qualify for severance payments or continued benefits.

Given these complexities, consulting with an employment attorney can help clarify rights and obligations under employment law. This is especially true for CHROs, who often have unique employment agreements and may face distinct legal considerations compared to other employees. For those interested in understanding how these legal factors intersect with broader HR leadership roles, the food and beverage sector in the hospitality industry offers additional insights into sector-specific employment practices.

Ultimately, the legal framework for severance after resignation is shaped by a combination of law, company policy, and individual negotiation. Knowing these elements helps CHROs make informed decisions about their own exit and severance package.

Negotiating severance as a chief human resources officer

Approaching Severance Negotiations as a Senior HR Leader

Negotiating severance as a chief human resources officer (CHRO) is a unique process. Unlike most employees, CHROs are deeply familiar with company policies, employment law, and the nuances of severance packages. This expertise can be both an advantage and a challenge when it comes time to negotiate your own exit.

• Know your employment agreement: Review your contract for any clauses related to severance pay, scheduled payouts, health insurance continuation, and benefits. Many CHROs have detailed agreements that specify what happens in the event of resignation or termination.
• Understand standard practices: While severance is more commonly offered after termination, some companies may offer severance packages to executives who resign, especially if the departure is amicable or part of a broader transition. Be aware of what is typical in your industry and region, as state laws and company policies can affect eligibility and terms.
• Assess your leverage: As a CHRO, you may have potential legal claims or institutional knowledge that can influence negotiations. Consider whether your departure could impact ongoing projects, confidential information, or the company’s reputation. These factors can sometimes encourage an employer to offer severance even when not strictly required by law.
• Negotiate the full package: Severance is not just about the lump sum or weeks of pay. Look at the entire severance package, including continued health insurance, outplacement services, references, and the timing of severance payments. Clarify whether you will be paid in a lump sum or over scheduled paydays, and confirm the number of calendar days or weeks severance will cover.
• Consult an employment attorney: Even with your HR expertise, it is wise to seek legal advice. An employment attorney can help you interpret state laws, review the severance agreement, and ensure your rights are protected. This is especially important if there are questions about wrongful termination or if you are being asked to waive legal claims.

Remember, the negotiation process should be professional and grounded in facts. Approach discussions with your employer as you would advise any employee: be clear about your expectations, document all communications, and ensure any severance offer is in writing. Your experience as a CHRO gives you insight into both sides of the table—use that perspective to advocate for a fair and comprehensive severance package.

Unique challenges for CHROs in severance discussions

Facing Complexities Unique to the CHRO Role

When it comes to severance pay and negotiating a severance package, chief human resources officers (CHROs) encounter a set of challenges that differ from those faced by other employees. The nature of the CHRO position means you are not only responsible for developing company-wide severance policies, but you may also be subject to heightened scrutiny when it’s your own employment on the line.

Balancing Policy and Personal Interest

One of the most significant hurdles is maintaining objectivity. As a CHRO, you have likely been involved in drafting the company’s severance agreement templates, determining how severance payments are calculated, and ensuring compliance with employment law and state laws. When negotiating your own exit, there’s a delicate balance between advocating for yourself and upholding the standards you’ve set for other employees. This can create tension, especially if your employment agreement includes unique clauses or if your severance package is more generous than what is typically offered to others.

Managing Confidentiality and Reputation

CHROs are often privy to sensitive information about the company, its employees, and potential legal claims. During severance discussions, both you and your employer may be concerned about confidentiality, especially regarding the terms of your severance agreement, scheduled payments, and any lump sum arrangements. Protecting your professional reputation while ensuring you receive severance that reflects your service and contributions is a nuanced process.

Legal and Ethical Considerations

Because of your expertise, your employer may expect you to be well-versed in employment law, wrongful termination risks, and the intricacies of severance packages. This can sometimes lead to more complex negotiations, as both sides anticipate a higher level of scrutiny. It’s not uncommon for CHROs to consult with an employment attorney to review the severance offer, especially if there are questions about health insurance continuation, benefits, or the number of weeks severance paid out.

• Ensuring severance pay aligns with company precedent and legal requirements
• Negotiating non-compete or non-disparagement clauses in the severance agreement
• Clarifying the timeline for severance payments, including calendar days to next payday
• Addressing any outstanding legal claims or disputes as part of the severance package

Setting the Tone for Future Exits

How a CHRO manages their own exit can set a precedent for future employment terminations at the company. The way you negotiate severance, handle communication, and transition out of your role may influence how severance is offered to other employees in the future. It’s important to approach these discussions with transparency and professionalism, ensuring that your severance package reflects both your contributions and the standards you’ve helped establish.

Best practices for HR leaders managing their own exit

Preparing for Your Own Departure

When managing your own exit as a chief human resources officer, it’s essential to approach severance discussions with the same diligence you would apply for any other employee. Even with your expertise, the process can be emotionally charged and complex. Here are some best practices to help you navigate this transition:

• Review Your Employment Agreement: Before any discussions, carefully examine your employment agreement. Look for clauses related to severance pay, benefits, notice periods, and non-compete obligations. This will clarify what you are entitled to if you resign and what the company’s standard practices are for severance packages.
• Understand Company Policy and Precedent: Assess how the company has handled severance pay for other executives or employees in similar situations. Consistency is important, both for your negotiation and for maintaining your professional reputation.
• Know the Law: Familiarize yourself with relevant employment law, including state laws that may affect severance payments, health insurance continuation, and the timing of your final payday. Consulting with an employment attorney can help you identify potential legal claims or risks, especially if you suspect wrongful termination or if the severance offer seems inadequate.
• Negotiate Thoughtfully: Use your knowledge to negotiate severance terms that reflect your years of service and contributions. Consider not just the lump sum or weeks of severance pay, but also the continuation of benefits, outplacement support, and any scheduled bonus or incentive payments. Be prepared to discuss the structure of the severance package, whether it’s a lump sum or paid over calendar days or weeks.
• Document Everything: Keep detailed records of all communications and agreements related to your exit. This includes the severance agreement, any amendments, and correspondence with your employer. Proper documentation is crucial if legal questions arise later.
• Plan Your Transition: As a CHRO, your departure can impact the company and its employees. Work with leadership to ensure a smooth handover, protect confidential information, and support your team through the change. This professionalism can help preserve your reputation and relationships.

Protecting Your Interests and Wellbeing

Leaving a senior HR role is more than just negotiating a severance package. Consider your long-term financial and health insurance needs, especially if your severance pay is tied to continued benefits. Evaluate the timing of your departure to maximize your eligibility for bonuses, stock vesting, or other scheduled compensation. If you have concerns about the terms of your severance or believe your termination may be wrongful, seek advice from an employment attorney before signing any agreement. By applying your expertise and treating your own exit with the same care as you would for any employee, you can secure a fair severance package and set the stage for your next opportunity.