Severance Package Hide Currency For Free

If you are serious about maximizing your opportunity for a better severance package, you should consider hiring an experienced severance attorney to review your severance agreement, evaluate your employment history and help you negotiate your severance package.

There's no requirement under the Fair Labor Standards Act that mandates companies provide severance following a layoff. However, organizations that do have a severance policy will usually include it either in the employee contract or offer letter you signed before joining the company, or in an employee handbook.

Severance packages may include salary continuation; vacation pay; continued, employer-paid period of benefits coverage; employer-paid COBRA premiums; outplacement services; counseling and resume workshops; and more.

Severance pay must be reported on Line 130 of your tax return if you have chosen to receive your severance pay directly as a lump sum. Your employer must withhold an amount for tax if is paid directly to you. Here in Alberta, the withholding tax rate for severance pay is dependent upon your personal income tax bracket.

You can choose how to pay the severance compensation. A lump sum is the full amount of severance pay given upfront. The large amount might be difficult for your business to pay out at once. But with a lump sum payment, the former employee is more likely to qualify for unemployment compensation in following weeks.

Even if you are not interested in negotiating more severance, you can negotiate the details of your severance package, such as whether you are paid in installments or a lump sum. Of course, you will want to take into consideration whether a lump sum severance will push you into a higher tax bracket.

Unfortunately, severance pay is taxable. In general, employees and employers both pay a 6.2% Social Security tax and a 1.45% Medicare tax on a person's wages.Employers are required to withhold 22% of the severance wages and pay the money to the IRS.