Workforce transitions happen for many reasons.
Sometimes it’s restructuring | Sometimes it’s performance | And sometimes, it’s the end of a chapter – a business closure, sale, or retirement.
At Merry Staffing, we’ve supported employers through all of these. One thing remains true:
How you exit people matters just as much as how you hire them.
Is Severance Legally Required?
In most cases, severance is not legally required unless:
It’s written in an employment contract | Included in a Union contract |It is part of Company policy
However, even when not legally required, severance is often strategically wise – especially for long-term employees. Employers should also be aware of federal and state laws like the WARN Act, which may require advance notice in larger layoffs or closures.
Standard Severance Guidlines
A common rule of thumb: 1- weeks pay per year of service Executives and senior leaders may receive: 4-6 months of salary
When Separation is Due to a Business Closure
Closures change the tone- but not the responsibility. Whether due to: Retirement| Financial Hardship | Partnership dissolution | Market shifts| Sale with-out employee retention | Long term employees are often displaced with no fault of their own.
In closures, employers should consider:
Length of service: Tenure carries weight. Long-term employees often built the company.
Financial reality of the Business: In a shutdown, cash flow may be limited. Structured or staged payments may be necessary.
Advance Notice: Providing as much notice as possible can be more valuable than an additional week of pay.
Benefit Continuation: COBRA assistance or health coverage contributions can significantly ease the transition.
Payout of Accrued PTO: Required in some states and ethically advisable in most.
Outplacement Support: Resume assistance, references, job search help – this matters deeply in closure scenarios. In many closures, severance may look more like: A lump sum based on funding available | Final payroll and PTO payout |A small “thank you ” bonus | Continued access to references and networking support. It doesn’t have to be extravagant, but should be intentional.
Emotional Impact of Term Separations
For employees with extended tenure, separation isn’t just about income. It’s Identity. It’s routine. It’s community. Closures in particular can feel personal – even when they’re a financial or strategic decision. A fair severance package acknowledges that investment.
Protecting the Business During Closure
Employers should protect themselves through any of the aforementioned scenerios:
Documenting agreements clearly| Using release of claims agreement when appropriate| Open communication with all staff |
A thoughtful, consistent approach reduces risk and preserves reputation.
A Strategic Framework for Employers
Before determining severance – especially in a closure ask – What can the business afford, realistically. What precedent does this set? Does this reflect our company values? Are we handling all employees consistently? If resources are tight, transparency often matters more than generosity.
My Final Thoughts about this Subject
Severance is not about guilt. It’s not about punishment. And it’s not about overextending a struggling business.
It’s about fairness, clarity and integrity – particularly for those who gave years of their professional lives to your organization. When a company closes its doors, how leadership handles that final chapter becomes part of its legacy. And people remember.
https://portal.ct.gov/dol/unemployment-benefits?language=en_US