Gratuity and Severance Pay
When employees put in years of dedicated work with a company, gratuity is often the final token that employer shows for their commitment. It is also a way to recognize loyalty and to encourage saving for the future. As an added bonus, gratuity can help boost employee morale and keep turnover low when the time comes to transition employees out of a job.
Severance pay, on the other hand, is a form of compensation paid in addition to an employee’s last paycheck. It is usually based on years of service and can be calculated according to specific company formulas. In some cases, the company will also compensate an outgoing employee for unused vacation or sick days.
The amount of severance pay you receive will depend on the terms set by your employer, which may be determined by local law or industry practice. You should check with your human resources department to find out what is standard for your organization. It’s also important to note that severance pay is usually taxed, as it is considered a form of supplemental wages. If you are being laid off, your former employer will likely withhold taxes from your severance package and include it in the tax report that you get at year end.
Is Gratuity and Severance Pay the Same?
In the US, employers are not required to offer severance packages to employees. However, many companies do so to increase employee morale, especially when they are conducting a mass layoff or a long set of firings. Severance pay can also be offered to outgoing employees as a gesture of goodwill, or to help them start a new chapter in their lives with a financial safety net.
As a rule of thumb, most severance packages consist of 2-3 weeks of salary plus other benefits like vacation and sick leave. In some cases, the severance package may also include benefits such as a laptop or cell phone, or even a company car.
If you are being laid off, you should try to negotiate with your company for a better package. If possible, it’s a good idea to get your colleagues to join you in your request, as this will strengthen your position. You should also make sure that you sign a non-compete agreement and other documents as required by the company before leaving.
While some companies have a “take it or leave it” approach to define severance pay, others are open to negotiating with employees who are considering leaving the company. You can start by finding out what other employers in your industry are offering, either through online research or by asking your network. It’s also a good idea to write a letter to your boss outlining the reasons why you want to leave, and what you’ve accomplished during your tenure. If you have an outstanding record, you can also consider giving your company a recommendation. This can be a powerful tool to increase your odds of getting a higher payout. If you are not given a reasonable severance package, you can take legal action against your former employer.
