Creating a Severance Package

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Strayer University *

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530

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Accounting

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Feb 20, 2024

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Creating a Severance Package HRM 530: Week 4 Assignment 1 Moneak Johnson Professor Dr. Obioma Iwuanyanwu 01/28/24

For this assignment, I will create a severance package for an employee who has been separated from a fictional company. This will provide an overview of the position differences, length of employment, specific salary amounts, and any additional benefits. I will analyze the tax consequences of severance pay and create a visual depiction that showcases the timeline for distributing the compensation. In the event of an unexpected termination, such as a layoff or the removal of a position, a corporation may provide severance compensation to the affected employee. XO Medical prioritizes its employees and is committed to providing a comprehensive severance package that facilitates the termination process and supports the search for new employment opportunities. The HR department has carefully crafted the severance package to align with the company's culture and values in a strategic manner. Our comprehensive severance package covers various aspects such as position variations, length of service, compensation details, additional perks, tax implications, and a disbursement schedule. XO Medical employees who are terminated due to misconduct will not be eligible for severance pay. The severance package is determined by the employee's position, which is divided into three different levels. The lower level, level one, includes front desk receptionists, referral coordinators, medical records personnel, medical assistants, and billing and coding personnel, among others. The mid-level, level two, includes positions such as administrative assistant, human resource clerk, medical assistant lead, and lead patient coordinator. The upper level, level three, includes positions such as office manager, human resource manager, physician assistant, nurse practitioner, and physician. The final severance package will be determined based on the employees' level and tenure. Level one employees will be provided with a lump sum payment of $2500 for each year of service, along with an extension of medical insurance for an extra 30 days. Additionally, they will be eligible for uncontested unemployment benefits. Level two employees will be eligible for a lump sum payment based on their years of service, extended medical insurance coverage, a recommendation letter, and access to uncontested unemployment benefits. Level three offers several benefits, including the choice between weekly pay until the balance is cleared or a lump sum payment. Employees also receive weekly payouts of $1,000 for each year they have been with the company. Additionally, they are eligible for medical insurance for an extra 90 days, a recommendation letter, and uncontested unemployment. Here's an example of severance pay: a level one employee who has been with the company for three years would receive a lump sum payment of $7500. Is Severance Pay Taxable? Severance pay, similar to unemployment pay, is subject to taxation as outlined in Publication 4128 by the Internal Revenue Services ( Irs-pdf | Internal Revenue Service , 1). At XO Medical, it is a requirement to deduct State and Federal taxes from all severance pay. These deductions will be reflected in the employee's W-2 form. Income taxes are deducted from earnings as a standard practice, with employers being required to report this information to the IRS annually. Similarly, employees are responsible for reporting their earned income to the IRS at the end of each year. ( Irs-pdf | Internal Revenue Service , 1).

Create a chart that depicts the timeline of the disbursement of the compensation Tenure Level Amount Disbursement Payout 0-5 (Lower) Level 1 $2500 Lump-sum, plus 30 days of medical insurance, uncontested unemployment immediately 5-10 (Mid) Level 2 $5000 Lump-sum plus 60 days of medical insurance, recommendation letter, uncontested unemployment benefits, and outplacement services 1st of every month until balance is zero 20-30 (Upper) Level 3 $10,000 Lump Sum or weekly payouts of $1,000 1st of every month until balance is zero Conclusion In conclusion, XO Medical provides its employees with a comprehensive severance package that includes benefits in the event of layoffs, termination of job positions, or mutual agreement. Employees terminated due to misconduct will not receive this benefit. The HR department strategically designed the severance package to align with the company's culture and values. The severance package encompassed various factors such as job roles, length of employment, financial remuneration, supplementary perks, tax implications, and a breakdown of disbursement. Source 1. Internal Revenue Service, & IRS, Publication 4128 Tax Impact of Job Loss (2020). Irs- pdf | Internal Revenue Service . (n.d.). https://www.irs.gov/pub/irs-pdf  Benefits and disbursements are subject to termination agreements signed upon employment and may alter depending on termination cause. This includes fraud, theft, embezzlement, fabricating documents, failing drug or alcohol tests, and criminal convictions.  Our organization retains the authority to modify or discontinue the severance policy. In the event of a company sale, acquisition, merger, etc., severance will only be provided if an employee is involuntarily terminated.

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