What is the term for an additional payment (other than salary) given to an employee when employment termination occurs?

What is the term for an additional payment (other than salary) given to an employee when employment termination occurs?

• A. Bonus
• B. Pension
• C. Severance
• D. Commission

Answer: (C)

Severance pay is the amount provided to an employee when their job ends, beyond regular wages, to help them transition after termination. It’s typically defined by company policy or an employment contract and can be a lump-sum or continued salary for a period, sometimes with related benefits. This is distinct from a bonus, which is usually tied to performance or a specific achievement; from a pension, which is a retirement benefit that accrues over time; and from a commission, which is variable pay earned for sales activity during employment. Severance focuses on easing departure and reflects the employer’s policy or agreement rather than an earned salary or incentive.

Severance pay is the amount provided to an employee when their job ends, beyond regular wages, to help them transition after termination. It’s typically defined by company policy or an employment contract and can be a lump-sum or continued salary for a period, sometimes with related benefits. This is distinct from a bonus, which is usually tied to performance or a specific achievement; from a pension, which is a retirement benefit that accrues over time; and from a commission, which is variable pay earned for sales activity during employment. Severance focuses on easing departure and reflects the employer’s policy or agreement rather than an earned salary or incentive.