Severance Pay

## Severance Pay

Severance pay is compensation provided to employees who are laid off, terminated without cause, or made redundant. It cushions the financial impact of job loss and is often exchanged for a release of legal claims.

### How It's Calculated

```
Severance = Base Salary × Weeks per Year of Service × Years Employed
```

### Regional Rules

| Country | Statutory Minimum | Notes |
|---------|------------------|-------|
| US | None (voluntary) | Common: 1–2 weeks per year of service |
| UK | 1 week/year (after 2 years) | Statutory redundancy pay, capped |
| Germany | 0.5 months/year (common practice) | KSchG provides strong protections |
| France | 0.25 months/year (< 10 yrs), 0.33 months/year (10+ yrs) | Indemnité de licenciement |
| South Korea | 1 month/year (mandatory) | Legally required after 1 year |
| India | 15 days/year (Gratuity Act, after 5 years) | Gratuity is a form of severance |

### Tax Treatment

Severance is generally taxable as ordinary income in the US. In the UK, the first £30,000 of termination payments is tax-free. Germany offers a tax-reduced 'Fünftelregelung' method for lump-sum severance.