Severance payments are pragmatic. Employers ought to consider allowing for severance payment and neutral letter-of-reference provisions in their separation agreements where there is no employee misconduct. These provisions often generate goodwill from a departing employee, thereby reducing lawsuits, and the provisions can also be used to bind an employee to confidentiality, non-disparagement, and non-compete obligations. Severance payments demonstrate humaneness and compassion on the part of the employer. Employment lawsuits are expensive and generate bad public relations for a company. As long as the severance compensation is not excessive, it really is a no-brainer in terms of a cost-benefit tradeoff for an employer. What is an appropriate severance payment will depend on the industry and the level of the employee.
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