Question

13-1

What is severance pay? What other type of payment do employees receive when they permanently leave a company? explain with the help of examples.

13-4

What are the main provisions of the FMLA?

Answer 1

Severance Pay and other types of payments employees receive when they permanently leave a job

Severance pay is the compensation that the employer provides to the employee once the employment is over. The Severance Package may also include other benefits, along with the payment. Other extended benefits that a severance package may contain include the outplacement assistance and health insurance. The outplacement services may be provided by the company itself or can be offered to an employee through third-party services. The services include coaching, cover letter writing, fine-tuning of the interviewing skills, and market analysis, among others.

The severance packages are provided to employees who are either retiring or are being laid off because of the downsizing of the company. In most cases, the severance payment and benefits depend on the duration for which the employee has served the organization. The employers also have the severance policies clearly stated in the employee handbook.

The severance payments are taxable and paid in a lump sum amount. This payment includes the regular pay of the employee along with one or more of the below-given payments.

a.An extra payment amount based on the duration for which the employee has worked with the company.

b.Payment for the accrued sick days, vacation days, and holidays that have not been used by the employee.

c.Stock options and retirement accounts

d.Dental benefits, medical insurance benefits, and life insurance benefits.

There is no law or Act that makes it necessary for a company to offer and provide severance pay, but it creates negative public opinion and relations and upsets the staff when it is not offered, especially in cases when the employee is fired because of no fault of his/her own.

While the severance pay and package may provide much more than the severance pay ( in the form of other benefits) itself, the other payments can also be provided along with the severance pay or even without it. Some of these payments include:

Health Insurance- COBRA or Consolidated Omnibus Budget Reconciliation Act makes it mandatory for the eligible employers to provide all the qualifying employing Health Insurance, which is done by making payment for a part of the insurance premium. The terminated employee should be provided the health insurance payment for up to 18 months if the firm has more than 20 employees.

Pension Plan Payment- If the employee is enrolled in 401 K Pension plan and policy, the pension plan payment should also be offered to him/her. The employee might be saving around up to 15% of his or her pre-taxation salary for retirement pension. This benefit and payment should also be forwarded by the employer to the departing employee.

Unemployment Insurance Payment- The employer may also cover the employees under an Unemployment Insurance. The payment here is not as much as the whole pay, and the payments may last to up to 26 weeks. The payment benefit extends to the employee only when he/she is being laid off because of no fault of his/her.

The Main Provisions of the Family and Medical Leave Act (FMLA)

A labor law of the United States of America, the FMLA or Family and Medical Leave Act of the year 1993 relates to the leaves taken by the employees. The provisions of the Act make it mandatory for the employers to provide their employees unpaid but job-protected leaves for the qualified and necessary family and medical reasons. Some of these reasons may include foster care, adoption, taking care of newborn, pregnancy, family or personal illness and others. The eligible employees can take a leave of up to 12 work weeks during a 12-month period if they qualify for it. Under the provisions of FMLA, the same can be up to a period of 26 weeks it is the military caregiver leave taken by the employer towards caring for an injured or seriously in seriously ill person or for him/herself. But the employee should have worked for at least 1250 hours in the last 12 months to be qualified to get leave under FMLA.

FMLA is administered by the Wage and Hour Division (a part of the U.S. Department of Labor). The provisions of the Act enable the employees to look after the health issues of themselves or their family members, and to bond better with the adopted or newborn children, among other benefits. The Act was passed during the reign of President Bill Clinton and was aimed to support the rapidly increasing workforce that wanted a legal support/provision through which they can care for themselves and their families while also raising a family.