What is severance pay?
Severance pay is money an employer offers an employee whose job is ending, usually in a layoff or restructuring. In the US it is generally set by an employment contract, company policy or a negotiated agreement rather than a general federal rule. The offer often asks the employee to sign a release of claims.
What a package may include
A severance package can include a lump sum or continued salary, payment toward health coverage, accrued leave payout, outplacement help, and an agreed reference. Each item is a term of the agreement, so ask for it in writing.
Before you sign
Read the release carefully, check the deadline to respond, and ask what happens to benefits. Health coverage can often be continued under COBRA. If you are on a work visa, ask how the end date affects your status. For legal questions, consult an employment attorney.
Example
An employer lays off a team and offers each person pay for a number of weeks based on years of service, in exchange for a signed release. One employee asks for the health coverage contribution to be added in writing.
Related terms and guides
Sources
- US Department of Labor, COBRA continuation coverage, https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra, accessed 31 October 2026
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.