Severance scheme

What is a severance package?

A redundancy plan, often part of a social plan, is an agreement between the employer and employee representation that regulates the conditions under which employees are laid off in the event of collective dismissal, such as in the case of reorganizations, company closures or mergers. The arrangement often provides for financial compensation, counseling for other work, training, outplacement, transition compensation and other provisions to mitigate the social consequences of the dismissal and promote the reintegration of redundant employees. Conditions can also be offered in practice, such as a signing bonus for the employee who signs a settlement agreement, a retention bonus if an employee is to be retained, or agreements can be made for a longer notice period instead of a higher severance payment. The latter may be more tax attractive to the employee because salary is subject to a lower tax rate than other payments such as severance pay, vacation days and vacation pay.