Severance Pay - Divorce Encyclopedia

Encyclopedia: A B C D E F G H I J K L M N O P Q R S T U V W Y

Term Definition Severance Pay - compensation paid an employee, often when he or she is involuntarily terminated by an employer.

Application in Divorce In the past generation, millions of American workers have squeezed out the workforce early as a result of the continuing restructuring of the economy. Many longtime employees retire voluntarily (but not genuinely by their own choice), or they retire involuntarily. When this happens, employees are often awarded severance pay based upon the number of years of service. For example, a furloughed worker may be given one week’s pay for every year of service.

Sometimes, severance pay is called allegations of age discrimination. In this routine, the older worker voluntarily departs, having waived any rights to charge age discrimination. In the case of reductions in force ("layoffs," as they are called,) sometimes the severance pay is sweetened by employer’s promise not to contest unemployment benefits.

As it applies to divorce, retirements under these circumstances may obscure an easy distinction between types of severance pay and early involuntary retirement benefits earned during a marriage (and marital property).

See Retirement.