What is severance in an employment context?

Severance in an employment context refers to the compensation or benefits an employee receives when their job is terminated, typically due to layoffs or organizational changes rather than performance-related issues. This payment may include a lump sum that is intended to provide financial support during the transition to new employment, often based on the employee's length of service or position within the company.

Understanding severance is important for both employees and employers, as it serves to ease the financial burden associated with unexpected job loss and can also help maintain a positive employee-employer relationship during difficult transitions. It is a form of goodwill from an employer's perspective and acts as a form of social safety net for employees.