Legal Definitions - separation pay

Definition: Separation pay is a type of compensation given to an employee who is leaving a company due to reasons such as redundancy, retirement, or termination. It is also known as severance pay.

Example: When a company downsizes and lays off some of its employees, it may offer them separation pay as a way of easing the financial burden of losing their job. For instance, an employee who has worked for the company for ten years may receive a month's salary for every year of service as separation pay.

Explanation: The example illustrates how separation pay is used to compensate employees who are leaving a company due to no fault of their own. It is a way of acknowledging their service to the company and helping them transition to a new job or career. The amount of separation pay may vary depending on factors such as length of service, job level, and company policy.