I have a colleague that was recently let go from her job.

51 Comments

1. AnonymousNovember 12,2023 at 2:49PM UTC

   Honestly, it may be a blessing that they do it this way. What typically happens is that a person panics, and rather than budget and spend the way they have been, they try to pay down bills, and the severance runs out faster than it would otherwise. She can try to make a written request to HR, but doing anything that would require legal action would likely not be worth the effort. The end of the year isn't that far away. It will also be an excellent way to make it through the holidays. She could take a seasonal job to supplement until then and then file for unemployment after the severance is paid out.

2. Sarah StadtherrNovember 12,2023 at 3:08PM UTC

   Also, a larger chunk of taxes will be taken on a large chunk payment. Honestly, the bi-weekly payout is better for the individual from that stand point alone.

3. Deb AllenNovember 12,2023 at 3:31PM UTC

   I agree this is a better plan as it does not prohibit her from getting another job, and pay for "hours not worked" is taxed higher than hours worked. If it were me, I would just be keeping good records to make sure they do not short the severance pay promised.

4. AnonymousNovember 12,2023 at 4:52PM UTC

   Severance is super great to have in her contract because severance is not mandated by law. She could have just as easily been let go with nothing more than her PTO earned.

   So wuth just 7 weeks left in the year, I say be grateful and be accepting of any monies paid.

5. AnonymousNovember 12,2023 at 6:25PM UTC

   Is she remaining on payroll, so to speak? When people leave my office, instead of getting unused leave in one payout, they remain on payroll (some refer to it as terminal leave) for as long as their leave lasts. During this time, since they are still on payroll, they maintain their health insurance and all other benefits, which can be useful if there's a gap until their new job benefits kick in. Does she have this upside? Even if not, I think financially this can be better for the employee, for all the reasons mentioned below.

6. AnonymousNovember 13,2023 at 12:31PM UTC

   To be honest, if they want the lump sum they will overall get less as that kicks them into a higher tax bracket after a certain amount. I would have a professional look at the agreement, then think of what is best. She doesn't have to have anything to with them either way moving forward, it's just a check, nothing else. This is a very regular process it obviously benefits both parties.

7. AnonymousNovember 13,2023 at 1:22PM UTC

   I'd be curious if in her severance agreement if her last day is Dec. 31st and they just don't want her coming into the office or physically working anymore. I've seen this before where they keep certain employees until that last date with an additional bonus, but let other employees stop working. It could be a blessing in disguise because if that's the case she can technically say that she is employed at the company until that last date which may make it easier for her to find another job while she is technically still employed.

8. AnonymousNovember 13,2023 at 1:29PM UTC

   We just did a RIF and are not doing lump sums but rather semi-monthly installments (to coincide with our pay periods). We actually state in the agreement itself that it will be installments. Companies may do that for a number of reasons - previous employer did it in part to hold people to the agreement they signed. It's easier on the company to pay it out over time rather than one huge payment at once (when there are several people affected). And, people have a tendency to spend it all at once - not advisable if they don't already have something lined up.

9. AnonymousNovember 13,2023 at 1:46PM UTC

   7-6 weeks left in the year... is this really something to be concerned about, let alone spend energy fighting over?

   As long as your colleague is getting the severance they're owed, then what's the issue?

10. AnonymousNovember 13,2023 at 1:58PM UTC

    There are a lot of upsides to being paid out this way as mentioned by commenters. The only downside is she won't be able to claim unemployment benefits and the same time she's receiving income from her employer.

11. AnonymousNovember 13,2023 at 2:55PM UTC

    It's actually going to result in more income than if she'd received a lump sum. Be happy it is as generous as it is, enjoy the rest of the year and embark on a fresh search in January.

12. AnonymousNovember 13,2023 at 4:32PM UTC

    Yes, a company can do this. While it may not be in her termination letter, my guess is she's being required to sign a severance agreement that should be more specific on the terms.

    As noted it can be beneficial to be paid this way.

    Finally, there seems to be some confusion on unemployment benefits. The employee will be barred from collecting unemployment during the severance period regardless of whether that is paid in standard payroll run or if it is paid in a lump sum.

13. EMILY KIKUE FRANKNovember 13,2023 at 5:23PM UTC

    It's not uncommon, and as others have said, it can be beneficial to her, especially since, in my understanding (I'm a career coach, not an HR person) she wouldn't qualify for unemployment during the coverage period listed for her severance-- that is, if she gets 3 months' worth of severance, she can't claim unemployment for that 3 months, regardless of how they money comes in. Because of the timing, though, I would recommend she apply for unemployment benefits ASAP with a start date of whenever the severance ends because it can take a while and the application is a bit of a pain.

14. AnonymousNovember 13,2023 at 5:27PM UTC

    Most companies will dispense funds this way. They feel is helps the employee maintain stable income rather than getting it all at once. Some even say that if you find a job within the company they'll stop your payments and some even ask for the money back. Other companies will stop paying you when you find a job.

15. AnonymousNovember 13,2023 at 6:01PM UTC

    Nope. It will vary by individual company. Now, state of CA (and other states) have stipulations around final payment and what's paid and when, true...but a company with CA employees can decide to do installment rather than lump sum payments.

16. AnonymousNovember 13,2023 at 7:04PM UTC

    She can apply at the same time (and I would advise that due to processing time) but wouldn't start receiving unemployment until severance is exhausted.

17. AnonymousNovember 13,2023 at 7:21PM UTC

    I should clarify that. I should not say when severance is exhausted but rather in this case, through the date the last payment is made. For example, if the company says you are going to receive X number of payments, starting on X date, ending on X date - the termed employee would provide that info when submitting their unemployment claim and the unemployment office would verify that information with the employer.

18. Sarah StadtherrNovember 13,2023 at 7:46PM UTC

    The payroll taxes end up being larger because the PR systems think the person is getting a bonus which would kick into a different tax bucket. I've seen it time and time again. For example: If you issue 2 checks for payout the vacation and sick time the EE is entitled to and then issue the 80 hours it will be x amount. If you pay the 2 weeks (assume 80 hours) and then add in the vacation and sick time, the taxes will be highter. I had a boss that knew this and, prick that he was, he'd have me set it up both ways and then chuckle to himself that the departing EE would be shorted x dollars by issuing 1 check!!

19. AnonymousNovember 13,2023 at 9:56PM UTC

    They may do this so that the people they're laying off get subsidized COBRA - this happened to me (I was laid off last year and COBRA was $600/month if I took the lump, or something like $200/month if I took my severance as my salary.

20. AnonymousNovember 14,2023 at 1:31AM UTC

    Not true- depending on your state. Always check state laws. Some is dependent how many “weeks you got” for example if you get 14 weeks of severance whether or not you take lump sum or bi weekly you can’t start to collect until severance “period” is over

21. AnonymousNovember 15,2023 at 5:18PM UTC

    Exactly. When we were downsized in NV, due to my tenure, I was given 1 year severance. NV doesn't allow you to collect unemployment while receiving severance. So, when I was eligible, I applied. I was quickly denied because I'd waiting two weeks after the year to apply. So sad.

22. AnonymousNovember 14,2023 at 3:19AM UTC

    Thanks for the perspective you provide. Just a note of caution on this regarding the current downstream implications with Unemployment (at least in California). You may be out of luck no matter how you receive the severance.

    I am currently on unemployment in California and need to re-certify every two weeks, among other matters, as to sources of income. One of the questions asked is: "Did you receive any other type of income such as the following:" - and 22 types of income are listed - among them "Severance or Employment Separation Pay" (also some permutations of this..). Therefore, it seems that unemployment pay would be reduced by any severance amounts received, even if the recipient got to this point in applying for unemployment. Also, the recipient needs to post a resume on CalJobs within three weeks of applying and (although it is hard to determine how much these resumes are scrutinized), this may also give them away should someone investigate, and reduce the unemployment income.

    This is speculation on my part, but these requirements could be a result of the widespread California unemployment income fraud during the Pandemic (?).

    When I had checked into these requirements for UE income before that timeframe, if you were over 50, you did not have to provide answers to either this extensive list of other sources of income, a resume on CalJobs or even indicate that you were currently attempting to find a job.

23. AnonymousNovember 14,2023 at 5:05AM UTC

    Severance of any kind, paid out in anyway is a gift and definitely not something that is mandatory. Accept it and be grateful. These are hard times.

24. AnonymousNovember 14,2023 at 5:34PM UTC

    I'm right there with you.
    I was employed for 3 years and the company bankrupted without warning. Laying people off in multiple states, not paying out PTO, absolutely no severance. We were lucky to even get a final paycheck! On top of that, I fought with unemployment to get my money as it took nearly 2 months to get UI to kick in. UI that will only last for 3 months and 2 weeks. The average job search and landing employment is probably 6 months at minimum right now. Jobs are paying horribly again and many companies are seeing hundred to thousands of applicants for basic $15 an hour entry level jobs. The government will not extend UI, despite a recession because of elections coming up. She is fortunate for the severance package.

25. AnonymousNovember 14,2023 at 1:20PM UTC

    as with any severance, pay for a consult with an attorney. Rules vary by state.

    My current company pays out severance over the course of the normal pay periods, however, they do allow for you to file and collect unemployment.

26. Anantha PadmanabhanNovember 14,2023 at 1:23PM UTC

    Good idea considering that they may renege on the biweekly commitment.

27. Karina Margit ErdelyiNovember 14,2023 at 1:32PM UTC

    the tax rate is far better if the severance is paid out as salary as opposed to a lump sum, which is treated like a bonus and taxed at nearly 50%. what they can do is make a larger payment via payroll so she can get her "lump sum" sans bonus tax.

28. AnonymousNovember 14,2023 at 1:33PM UTC

    I've had that happen to me before too. The company also continued to pay my benefits and continued my health care coverage. It was a better deal in the long run.

29. AnonymousNovember 14,2023 at 2:13PM UTC

    I don't know legally, but the reason for keeping the timing the same as 'paycheck timing' is so that employee doesn't spend all at once on a splurge and then can't pay bills. Sigh.

30. AnonymousNovember 14,2023 at 2:21PM UTC

    This is a better deal because she can keep her health care insurance.
    I was laid off after 20 years of service and received a great severance package. I received 3 weeks of pay and benefits for every year that I worked for the company. I was paid on the same pay cycle and kept my health care insurance. I also took advantage of the perks that the company offered like tuition reimbursement and skill training opportunities.

31. AnonymousNovember 14,2023 at 2:43PM UTC

    Be careful of what your severance package states about benefits. I was laid off once and only received benefits through the end of that month, but was paid bi-weekly for 3 months. I had to obtain my own benefits before being hired with a new company.

32. AnonymousNovember 14,2023 at 3:00PM UTC

    Why doesn't she just ask for her preference, then she can get a direct answer?! Since severance is not required, she can't demand it.

33. AnonymousNovember 14,2023 at 3:40PM UTC

    Did she sign off on the severance, if so then this would have been stated. Therefore, she has agreed to it.

34. Delete AccountNovember 14,2023 at 4:31PM UTC

    Do you realize that getting a lump sum give you a huge tax hit and that it less impactful to have it paid out over a period of time. It is in the best interest of the company to go the lump sum route.

35. AnonymousNovember 14,2023 at 5:22PM UTC

    Not so. I WAS one such employee!

36. AnonymousNovember 14,2023 at 5:27PM UTC

    yeah, she could read her employee manual, it should all be outlined in there

37. AnonymousNovember 14,2023 at 9:26PM UTC

    Not the OP, just an observer of this thread...but, typically severance-related details aren't included in an employee manual.

38. AnonymousNovember 15,2023 at 2:23PM UTC

    agree.

39. Delete AccountNovember 14,2023 at 7:04PM UTC

    When my company did biweekly severance, they kept the health insurance as if we were still employed and that was huge help for those let go and that ceased with lump sum.

40. Delete AccountNovember 14,2023 at 10:28PM UTC

    I didn't say from a payroll perspective but wholistically.

41. Deb AllenNovember 14,2023 at 10:48PM UTC

    It is legal in MN, and my accountant pointed it out.

42. maria roseNovember 15,2023 at 1:42AM UTC

    I understand the disappointment and frustration of being laid off but she’s getting paid a severance package that is paying her with a less tax liability, and you are stating she’s complaining about it., because she feels as if she’s still part of the company. I advise that she re-read her documents that she signed off on to get that severance payment package and see if she has the right to seek out new job opportunities while collecting her severance paychecks and if not that means she is getting paid and doesn’t have to look for work yet but has time to prepare herself. ( resume redo, etc). Plus she is still covered by her healthcare insurance and doesn’t have to file for unemployment yet.

43. AnonymousNovember 15,2023 at 2:22PM UTC

    be happy to NOT get it in a lump sum!!!!! You'll get killed in taxes and 401K "holdings" with a Lump Sum payment!!!! I received a Lump Sum when I lost my job 5 years ago and it totally sucked...would have MUCH preferred a staggered pay out. And yeah, there's no recourse on this.

44. AnonymousNovember 15,2023 at 2:46PM UTC

    Just an fyi - 401k deductions cannot come out of severance pay. The IRS does not allow for it. And severance must be taxed like regular earnings - not like a bonus payout or whatever.

45. AnonymousNovember 15,2023 at 10:28PM UTC

    You are correct...but they also paid out my vacation hours and between taxes and 401k...wow, it was a net wipeout!

46. AnonymousNovember 16,2023 at 12:52PM UTC

    I did mis-speak about the taxes and severance...it is taxed supplemental not regular. Vacation payouts are too. But yet, 401k does not, cannot come out of severance. (And they should have told you/asked you about your 401k coming out of vacation payout...they can do it, but you can also ask them not to.)

47. AnonymousNovember 16,2023 at 2:46PM UTC

    Taxing / Not true. Severance may be coded like w-4 or or may be coded as “other” - other is paid out higher - it’s up to your employer to decide

48. KatNovember 15,2023 at 5:39PM UTC

    Agreed. I once got a bonus that was paid in a lump sum and the government saw more of it than I did. A severance paid out over time gives you a steady income longer while you're looking for a new job.

49. AnonymousNovember 15,2023 at 7:23PM UTC

    Many companies choose to pay out beverage packages in the same manner that follows payroll. There is no law that states they must pay it in a lump sum. There is also no law that states they must pay a severance. Not to be confused with paying accrued vacation time.

50. AnonymousNovember 15,2023 at 10:13PM UTC

    A lump sum will raise her tax bracket for this year. In my case it also caused my Medicare premium to go up (probably for the rest of my life). Something to consider.

51. Joycelyn M. SiameNovember 16,2023 at 3:16PM UTC

    I don't see what the big deal is with getting it biweekly, so far as she receives all the money owed to her, and this is all put in writing. It actually works better for her where taxes are concerned (more taxes would be taken out of the lump sum).