How to Calculate a Redundancy Package
Unless you happen not to like your job, one of the benefits of being laid off is the redundancy package. Your severance pay and follow-on benefits will depend upon several factors, including how long you have worked at the company, your job role and salary as well as how generous your company decides to be. Under the United States Fair Labor Standards Act, employers are not required to pay severance although many companies do offer a notice period and some level of compensation based on the length of time you have worked with them.
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Instructions
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Read the redundancy letter from your company. This will provide all the details of your severance package, including severance pay, severance-related benefits and any discretionary payments.
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Speak with your company's human resources department so that you fully understand the redundancy package offered to you. Don't be shy about asking any questions if the terms of the package are not clear.
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Calculate the total value of the redundancy package. Starting with your severance pay, count the number of years you have worked at the company from your starting date to the end date noted in the letter. If you have worked for the company for more than two years, larger corporations typically pay two weeks of regular wages for every full year of employment in a salaried position. Certain companies offer a minimum of three months' severance pay.
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Work out how much the company owes you for vacation pay, if this is included in the terms of the severance letter. Companies will often give the daily equivalent of your annual salary for holiday time owed to you but not taken.
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Add to this amount the benefits you will continue to receive, such as health insurance. A company will often match this, week for week, with the severance pay. For example, if you are entitled to 10 weeks of severance pay because you were an employee for five years, you will also receive your regular benefits as subsidized by the company for 10 weeks.
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Check to see if a discretionary payment, or bonus, is also part of the severance package. Certain industries that offer an annual bonus on top of a salary may include an extra payment, especially if you are made redundant immediately prior to the time when company bonuses are usually paid.
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Add up the dollar amount of all of the aforementioned components to value your redundancy package.
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Tips & Warnings
Speak to a labor lawyer before signing any release letter from your company.
If you feel that your redundancy package is too small, considering your previous contribution to the company, speak up and ask for what you want. Make sure you back this up with evidence, such as how much revenue you or your group generated for the past year or several years.
Not many companies will give you the redundancy package as a lump sum. Severance pay and benefits are typically paid over a specified period.
There is usually a cap set by companies regarding the total amount of severance they are willing to pay out, despite how many years you have been working at the company.
Unsalaried jobs or hourly wage jobs typically receive lower severance pay versus salaried jobs, if the employee is not part of a union. Typical severance pay in the United States is one week's salary for each full year of service. In contrast, top executives will get closer to three weeks for each year of service.
References
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