[btilly]

The point of severance is to give ex-employees a reason not to sue.

However there is left point in protecting from lawsuits when there will be nothing left that can be sued.

However I suspect that not paying out owed PTO may be a different story...

[vcanales]

It's really interesting to read this perspective on what severance is in the US, because in my country it definitely is just a right everyone has so that they can land on their feet.

[analog31]

In the US, we have unemployment compensation insurance for that purpose. I believe you can collect unemployment even if the employer is insolvent, because it's pre-paid by the employer, and comes out of a collective fund.

As I understand it, a severance usually involves the employee signing some sort of agreement.

[closeparen]

Unemployment insurance in California maxes out at $450/week, pre-tax. It can help you draw down your savings more slowly, but by itself is not even enough to make rent. The numbers may have made sense before the latest bout of housing price and wage inflation, but they don't anymore.

[nradov]

There are still places in California where it's possible to rent for <$1800/mo.

[fphhotchips]

Right, but who's renting them when they're on an engineer's salary? You can't just up and move instantly upon finding out you're in the unemployment line.

[closeparen]

You pay rent with after-tax money. No way are you renting for $900.

[throwaway2048]

what a bargin

[adamredwoods]

For a family?

[chii]

So who pays for this insurance? Is it usually the company, or the employee?

[btilly]

Employers. See https://workforcesecurity.doleta.gov/unemploy/uifactsheet.as... and https://en.wikipedia.org/wiki/Unemployment_benefits#United_S... for more information about it.

Note that the caps are per state, but is sufficiently low that it doesn't replace a professional level income. Therefore if your lifestyle is based on an income of $50K+, you are strongly advised to acquire personal savings for emergencies in case you lose your job. And C-level executives frequently have contracts which specify severance packages that guarantee their income for an extended time if they are fired. See https://en.wikipedia.org/wiki/Golden_parachute for more on that.

This can lead to weirdly misaligned incentives, like C-level executives on a failing company trying to get fired because their severance package will leave them better off than staying with the sinking ship.

[otoburb]

>>This can lead to weirdly misaligned incentives, like C-level executives on a failing company trying to get fired because their severance package will leave them better off than staying with the sinking ship.

If anybody is fired in the U.S. they are almost always never entitled to severance. Severance is primarily available for employees who have been laid off. Such companies would love to fire executives in the true sense of the word if they had cause to save on any costly packages.

[btilly]

A contract can say whatever it says. If it says that in event of your being asked to leave the company that you get 6 months salary, then you get 6 months salary upon being asked to leave. Regardless of why you're asked to leave the company.

This kind of contract term is not given rank and file employees. But I personally know executives who have been fired and kept a salary because it was in their contract, including one who was fired in the last year, and another who maneuvered to get fired a few years ago because the company was going out of business.

[s73v3r_]

Both.

[pkaye]

So what happens if the company in insolvent in your country? Who pays the severance?

[itronitron]

owed PTO is probably the main reason behind the trend for unlimited vacation among startups as they owe employees nothing after they part ways (since no vacation hours were 'earned')

[JBlue42]

California they have to pay out PTO, that is, if they actually earned those benefits. When I worked in vfx, very few people were 'staff' and most were 'contractors' so basically W-2 with no benefits charging hopefully high enough rates to get by.

What they needed is to have a less reputable CEO - mine paid out $2k for signing a non-disparagement clause when 3/4 of the staff were laid off and the rest moved to Vancouver.