Everyone knows that when an employee is terminated and he has worked for at least one year for the employer, he is eligible for severance pay. Most employees also know that severance pay is one month’s pay (according to the last full salary) multiplied by his tenure. Or in layman’s terms, one month’s pay for each full year worked and prorated for any portions of a year.
The “minor” detail that everyone should be aware of is the question of what actually is the “last full salary” ?
Well, it really depends on how you are employed. The simple case is that of an employee who receives a monthly based salary, then the above would apply.
However, there are other types of salaries: Hourly based, Daily based, job based.
Many unique scenarios can also have an effect on what the “last month’s pay” actually is and thus effecting how severance pay is calculated.
For instance, an employee who worked full-time and changed to part time at some point (or vis-versa), an employee whose pay was reduced, an employee that had a temporary change in his last salary, an employee whose type of employment changed in essence, an employee whose position changed in essence or an employee who receives a base pay and changing commissions.
The Labor laws all specifically address these scenarios by dividing up the salary into several parts, before and after the change and a separate calculation is done for each part accordingly.
Those who receive changing salaries due to hourly or daily rates that change each month due to the number of hours/days worked or due to commissions – an average of the last 12 salaries is used as a basis for severance pay calculation.
