It Does The Business Good - family-owned business and charitable contributions - Brief Article
Author: Entrepreneur

Give to employees when they leave, so you'll get more while they're here.

When employees resign or are terminated, you don't have to give wages or benefits beyond paying them for the time they worked. Even so, most entrepreneurs offer some sort of severance package to departing employees.

An attractive severance policy can benefit your company in two key ways, says Wayne Hersh, a labor relations and employment lawyer with the firm Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone in Irvine, California.

* It can aid in hiring and retention. A severance policy that offers, for example, one week's salary for each year of service departing employees have put in may be an attractive benefit. Of course, you can exempt employees who are terminated for cause. You may also include other restrictions, such as disqualifying employees from the severance package if they go to work for competitors or disclose confidential information.

* It can be used as a tool to obtain a release or waiver of claim. For example, you may offer a severance payment on the condition that the employee agrees not to sue you for any real or alleged employment-practices violations. Employees don't have to sign such agreements, but if they don't, you won't have to pay any severance compensation.

Hersh says severance packages grew out of negotiations between labor organizations and employers in the last century. Today, severance compensation may include cash (paid in a lump sum or in installments), continued benefits or even stock purchase arrangements.