Compensation paid to employees upon termination of employment.
Severance pay is compensation provided to an employee when their employment is terminated, typically through redundancy or mutual agreement. In addition to statutory redundancy pay (required by law in many countries), employers may offer enhanced severance packages as part of settlement agreements. Severance pay may be subject to income tax, depending on the amount and how it is structured. HR software calculates statutory severance entitlements, models enhanced packages, and processes payments through payroll.
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