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Contract & Commercial Law vocabulary · Employment Contracts

Severance pay

Meaning in contract & commercial law, with examples

nounCommon term

In contract & commercial law, severance pay means: Money paid by an employer to an employee whose job ends, often based on length of service and sometimes required by law.

In Turkish: kıdem tazminatı, işten ayrılma tazminatı

How it is used

Also called 'severance' or a 'severance package', which may include extra pay, benefits and a reference. In the UK, 'redundancy pay' is the statutory payment when a job disappears. Employers often pay severance in return for a settlement agreement in which the employee waives claims.

Example sentences

  1. Employees with more than five years' service receive six months' severance pay.

  2. The severance pay was agreed as part of a settlement agreement.

Common collocations

  • severance package
  • statutory severance pay
  • be entitled to severance pay
  • redundancy pay
  • dismissalThe ending of an employee's contract by the employer, whether for misconduct, poor performance, redundancy or another reason.
  • employment contractA contract between an employer and an employee that sets out the job, pay, working hours, holidays and the rules for ending the relationship.
  • notice periodThe length of time between giving notice to end a contract and the date on which the contract actually ends.
  • settlementAn agreement that ends a dispute or lawsuit, usually with one party paying an agreed amount and both sides dropping their claims.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Employment Contracts

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This page explains English vocabulary for learners. It is not legal advice.