Learning Activity: Creating A Severance Package
Learning Activity Creating A Severance Packagecompleting This Activit
Learning Activity: Creating a Severance Package Completing this activity will help you prepare for the upcoming assignment in Week 7. Think of it as practice for the assignment. As such, focus on content, not formatting. Your paper should be no more than 1 to 2 pages in length. For this activity: Create a severance package for a separated employee in a fictitious company. At a minimum, include: Position differences. Years of service. Actual compensation amounts. Any additional benefits that you want to add. Determine whether severance pay is taxable. Create a chart that depicts the timeline of the disbursement of the compensation. Use Microsoft Word or an equivalent application, such as OpenOffice. Use at least one quality academic resource in this activity. Consider beginning with your course textbook and quality sources that can be found in the Strayer Library. Note : Wikipedia and other websites do not qualify as academic resources.
Paper For Above instruction
In this learning activity, I will develop a comprehensive severance package for a hypothetical employee who has recently separated from a fictional company, XYZ Corporation. This exercise is designed to prepare me for the Week 7 assignment by applying theoretical knowledge to practical scenarios, emphasizing critical components such as position differences, years of service, compensation details, additional benefits, and the tax implications of severance pay.
Scenario Description
The employee in question is Jane Doe, who has served as the Marketing Manager at XYZ Corporation for 10 years. Jane’s role involved significant responsibilities, including overseeing marketing campaigns, managing a team, and liaising with external agencies. Her recent separation was due to organizational restructuring, which resulted in her position becoming redundant. Her annual salary was $85,000 before her departure.
Severance Package Components
Based on my research and the company policies, the severance package for Jane Doe includes the following components:
- Severance Pay: Two weeks of pay for every year of service, leading to a total of 20 weeks of compensation. At her salary rate, this equates to $32,692.31 (calculated as $85,000 / 52 weeks x 20 weeks).
- Additional Benefits: Continued health insurance coverage for three months post-separation, paid by the company. A letter of recommendation and outplacement services are also included to assist Jane in her job search.
- Accrued Vacation Days: Payment for 10 accrued vacation days, totaling approximately $1,634.62.
Tax Considerations
Regarding taxation, severance pay is generally considered taxable income by the IRS. Therefore, the severance amount will be subject to withholding taxes, including federal income tax, Social Security, and Medicare taxes. The additional benefits such as health insurance continuation under COBRA are also taxable benefits, but specific tax treatment may vary depending on the plan and applicable laws.
Disbursement Timeline Chart
| Timeframe | Disbursement Description |
|---|---|
| Week 1 | Severance pay for the first installment (4.62 weeks equivalent to approximately $3,308), paid via check. |
| Week 4 | Second installment of severance pay (another 4.62 weeks), paid via check. |
| Week 8 | Final installment of severance pay, health benefits continuation, and payment for accrued vacation days. |
Conclusion
This exercise emphasizes the importance of structuring a fair and legally compliant severance package. By considering the employee’s tenure, role, and benefits, along with tax implications, organizations can ensure they provide support during transitions while adhering to legal requirements. Such practical applications enhance understanding of employment laws and benefits administration essential for HR professionals.
References
- Bennett-Alexander, D., & Hartman, L. (2019). Employment Law for Business. McGraw-Hill Education.
- U.S. Department of Labor. (2021). Employee Benefits Security Administration: COBRA continuation coverage. Retrieved from https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/cobra
- Shaw, M. (2020). Understanding severance pay taxation. Journal of Labor & Employment Law, 24(3), 150-162.
- Jackson, T. (2022). HR practices in terminations and severance packages. Human Resource Management Review, 32(1), 45-58.
- Internal Revenue Service (IRS). (2021). Publication 15-B: Employer's Tax Guide to Fringe Benefits. Retrieved from https://www.irs.gov/publications/p15b
- Smith, R. (2018). Designing effective severance agreements. Harvard Business Review. Retrieved from https://hbr.org/2018/09/designing-effective-severance-agreements
- Strayer University. (2023). Human Resources Management Textbook. Strayer University.
- Johnson, L. (2019). Legal considerations in employment terminations. Employment Law Journal, 33(4), 224-235.
- Williams, P. (2020). Outplacement services and employee transition strategies. Personnel Psychology, 73(2), 197-215.
- Fisher, G. (2021). Tax implications of employee benefits. Tax Policy Journal, 42(1), 65-80.