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What you should know about severance pay

When you are considering employment in Montgomery, Pennsylvania, a severance agreement is one factor that is often worth negotiating before you accept the job. This agreement provides you with a continuation of a portion of your pay and/or benefits if your employment is terminated and releases your employer from liability. We at the Law Offices of Jacobson and Rooks are aware that this employment contract could result in positive or negative outcomes, depending on how it is structured.

According to the Pennsylvania Department of Labor and Industry, severance pay is not money that you have earned from your employer. It is payment in addition to the money you have earned, and which your employer already owes you. The amount you receive is generally a percentage of your annual salary and the extension of your benefits for a specified period of time after your employment ends.

The Equal Employment Opportunity Commission lists several items that are often included in the severance contract, including the following:

  •          Date of termination
  •          Severance payments and benefits
  •          Whether references will be offered
  •          General release

The release waives your right to sue the employer for discrimination based on age, disability, gender, race, color or religious preference.

In Pennsylvania, the amount of severance pay you receive may affect your unemployment compensation. If you apply for unemployment benefits after Jan. 1, 2012, and you signed the severance agreement on or after that date, any pay exceeding 40 percent of the state’s average annual wage will be deducted from your compensation. Once you are no longer receiving severance pay, you would receive the full amount of unemployment compensation to which you are entitled. Visit our website for more information about employee’s rights.

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