4 ms·

Severance IS wage

by friendzis 3y ago

Severance IS wage

dehrmann 3y ago
Why would you pay severance when declaring bankruptcy?
- closewith 3y ago
  Obviously it depends on the jurisdiction. In countries with strong employees protections, redundancy payments have a high priority during administration.
irjustin 3y ago
Errrr how? [Edit] Legally how is it. Not just because it's commonly measured in months of wages
- friendzis 3y ago
  It's not the way it is calculated. All payments attached to employment contract are wages, be it regular salary, bonuses, vacation pay or severance. Say the contract defines severance of 1 month for each full year worked capped at 3 months: at the moment contract reaches 1 year anniversary, the employee should be owed 1 month worth of severance upon contract termination
  - irjustin 3y ago
    You're right, but only if it's in the employment contract. It's not a legal requirement to have one to hire someone [0]. Way more commonly, severance is part of a termination contract, and thus it would not be here. [0] https://www.dol.gov/general/topic/wages/severancepay https://www.dol.gov/general/topic/wages/severancepay
    - pasc1878 3y ago
      And I think some of the severance pay is tax free at least in the UK.
  - booi 3y ago
    I've worked in the sf tech industry my entire career and my employment contracts have never included guaranteed severance. I've seen severance being paid out to fellow employees but afaik it is done as courtesy and wasn't legally required. Are you European? Maybe it's different there.
    - friendzis 3y ago
      > my employment contracts have never included guaranteed severance My assumption was that we would not be talking about "unpaid severance" if there was no severance defined in the first place. > Are you European? Maybe it's different there. Generally severance is not legally mandated, but can be mandated under some specific circumstances, e.g. no-notice termination. Usually it is similar to US: either defined in collective (union) agreement or part of termination contract.
      - sgerenser 3y ago
        Well your assumption is wrong. There was no defined severance, people are saying that Convoy should have paid severance anyway because its the “right thing to do” when laying off employees. And others are saying they couldn’t because of creditors coming first.
    - bdowling 3y ago
      > done as courtesy and wasn't legally required. Usually severance is consideration for agreeing not to sue the company, not taking trade secrets, etc.
- irjustin 3y ago
  I realize one possible misconception is severance vs "gardening leave" [0]. They look really similar, but legally entirely different. In "gardening leave" you're still an employee and on payroll until the last day. Whereas severance you're not an employee and typically paid lump-sum (but doesn't matter for this discussion). So in this specific situation, yes, that would be wages and would be paid out first before creditors because you are _legally_ entitled to those wages. The problem of course you cannot hope to put a whole company on "gardening leave" in hopes that it can "act as severance" for everyone. Your creditors will sue you and easily win. They'd probably put an emergency injunction on the company and remaining funds before the first month was even completed once they learned of "creditors hate this one little trick!" [0] https://en.wikipedia.org/wiki/Garden_leave https://en.wikipedia.org/wiki/Garden_leave
  - thaumasiotes 3y ago
    That's an unlikely misconception, since paid noncompete periods are not something that most people have ever even heard of.
    - hamburglar 3y ago
      Paid noncompete periods are far from the only reason for gardening leave.
      - thaumasiotes 3y ago
        What are some examples that somebody might have heard of?
        pasc1878 3y ago
        For gardening leave. You have X months notice ie the company has to tell you X months before yoir severance date. Often the company will want somone they let go out of the office ASAP. Thus you spend your X months on gardening leave paid as normal wages. On your severance date you get your redundancy package - in the UK there is a defined minimum but in some markets e.g. finance they pay more as they do want to keep current employees happy so they see that they just don't get thrown out. As much of the US is at will employment I doubt this scenario will occur often

Severance IS wage

dehrmann 3y ago

Why would you pay severance when declaring bankruptcy?

closewith 3y ago
Obviously it depends on the jurisdiction. In countries with strong employees protections, redundancy payments have a high priority during administration.

irjustin 3y ago

Errrr how? [Edit] Legally how is it. Not just because it's commonly measured in months of wages

friendzis 3y ago
It's not the way it is calculated. All payments attached to employment contract are wages, be it regular salary, bonuses, vacation pay or severance. Say the contract defines severance of 1 month for each full year worked capped at 3 months: at the moment contract reaches 1 year anniversary, the employee should be owed 1 month worth of severance upon contract termination
- irjustin 3y ago
  You're right, but only if it's in the employment contract. It's not a legal requirement to have one to hire someone [0]. Way more commonly, severance is part of a termination contract, and thus it would not be here. [0] https://www.dol.gov/general/topic/wages/severancepay https://www.dol.gov/general/topic/wages/severancepay
  - pasc1878 3y ago
    And I think some of the severance pay is tax free at least in the UK.
- booi 3y ago
  I've worked in the sf tech industry my entire career and my employment contracts have never included guaranteed severance. I've seen severance being paid out to fellow employees but afaik it is done as courtesy and wasn't legally required. Are you European? Maybe it's different there.
  - friendzis 3y ago
    > my employment contracts have never included guaranteed severance My assumption was that we would not be talking about "unpaid severance" if there was no severance defined in the first place. > Are you European? Maybe it's different there. Generally severance is not legally mandated, but can be mandated under some specific circumstances, e.g. no-notice termination. Usually it is similar to US: either defined in collective (union) agreement or part of termination contract.
    - sgerenser 3y ago
      Well your assumption is wrong. There was no defined severance, people are saying that Convoy should have paid severance anyway because its the “right thing to do” when laying off employees. And others are saying they couldn’t because of creditors coming first.
  - bdowling 3y ago
    > done as courtesy and wasn't legally required. Usually severance is consideration for agreeing not to sue the company, not taking trade secrets, etc.
irjustin 3y ago
I realize one possible misconception is severance vs "gardening leave" [0]. They look really similar, but legally entirely different. In "gardening leave" you're still an employee and on payroll until the last day. Whereas severance you're not an employee and typically paid lump-sum (but doesn't matter for this discussion). So in this specific situation, yes, that would be wages and would be paid out first before creditors because you are _legally_ entitled to those wages. The problem of course you cannot hope to put a whole company on "gardening leave" in hopes that it can "act as severance" for everyone. Your creditors will sue you and easily win. They'd probably put an emergency injunction on the company and remaining funds before the first month was even completed once they learned of "creditors hate this one little trick!" [0] https://en.wikipedia.org/wiki/Garden_leave https://en.wikipedia.org/wiki/Garden_leave
- thaumasiotes 3y ago
  That's an unlikely misconception, since paid noncompete periods are not something that most people have ever even heard of.
  - hamburglar 3y ago
    Paid noncompete periods are far from the only reason for gardening leave.
    - thaumasiotes 3y ago
      What are some examples that somebody might have heard of?
      - pasc1878 3y ago
        For gardening leave. You have X months notice ie the company has to tell you X months before yoir severance date. Often the company will want somone they let go out of the office ASAP. Thus you spend your X months on gardening leave paid as normal wages. On your severance date you get your redundancy package - in the UK there is a defined minimum but in some markets e.g. finance they pay more as they do want to keep current employees happy so they see that they just don't get thrown out. As much of the US is at will employment I doubt this scenario will occur often