There are many elements beyond a final paycheck that go into a robust severance package. When you are letting an employee go, making sure that everything falls into place, the way it needs to is crucial for ensuring a smooth transition. Taking the time to review your package before termination or layoff goes a long way towards maintaining continuity and regulatory compliance.
Stocks and Stock Options
If your company offers stocks or performance shares, you need to go over vesting and limitations that govern when these can be exercised or earned. When an employee is terminated or laid off, it is common for them to request that their stocks and performance shares receive complete or partial acceleration on any restricted stocks. Many companies choose to conduct a cashless exercise of vested stocks and extend periods to exercise any stock options, such as for an additional 90 days. Still, you can extend this out as far as you’re comfortable.
Offer Employment Services & References
Whether dealing with a termination or a layoff, it’s always a good idea to assist employees in their search for a new job. Arranging the aid of an outplacement firm can help former employees land on their feet is one way to do this. When layoffs are the cause, this can help preserve employee morale and can help you maintain good contact with former employees that can be beneficial as your company’s bottom line improves.
Further, unless there are extenuating reasons for a termination, such as theft, violence, etc., you should provide a reliable reference for former employees. It would be best if you discussed what you would say to prospective employers with the employee as part of the severance package. This conversation will help ease them into the transition and helps them plan accordingly.
Review Your Release Language
We live in a litigious society, and you need to make sure that the language within your severance package is airtight. Always have your legal team thoroughly review the language within your agreement to ensure that you are covered against any complaints, promises, regulatory challenges, and potential liabilities a disgruntled employee can use to file a lawsuit.
Further, make sure that your severance agreement includes a non-disparagement clause. This clause can help protect the reputation of your company by preventing former employees from attempting to cause malicious harm to your organization. It gives you options for recourse that can discourage libel, slander, and the release of corporate secrets.
Seal the Deal on Soliciting Clients
You must make sure that a former employee won’t drain your company of confidential information, employees, or clients. This practice means agreeing on a non-solicitation clause that will limit the individual’s ability to lure employees or clients away. You must make sure that the agreement is sufficient in duration to protect your business, but not overly aggressive to the point that it could be considered illegal.
Additionally, if you are requesting a non-compete agreement that extends beyond a short time, you will need to provide sufficient compensation to the employee. If you do not, many states have statutes in place that nullify the validity of the agreement, and a former employee can use these as grounds for a lawsuit. Again, spending some time with your legal counsel is the best way to ensure that you maintain legal compliance in your state.
Contact Greenlink Payroll at (480) 385-2525 for more information about managing your talent roster or payroll finances when planning for termination or layoff.