The Unemployed Life
The Incredible Shrinking Severance Check
When the check comes in the mail, it’s never as big as you imagined it would be. You were promised eight weeks, but the amount is closer to six.
Before your paranoia has you wondering whether you’re finally being penalized for illicit use of the office photocopier or swiping extra cream cheese packets from the cafeteria, you could try asking your HR department for an explanation. But don’t be surprised if they don’t respond, to a query from you, a former employee who’s no longer their problem.
You could also try to math it out– an approach that will probably only confuse matters.
Or you could just ask us. How come so small? It turns out that the government thinks your severance check is a perk—“supplemental wages”—and treats it like a bonus. (We think this view is slightly insulting. You were essentially fired, after all, and now they’re short-changing you on post-work pay?)
Every company handles it differently, but the IRS allows companies to take a straight 25 percent federal withholding tax if they want to. That’s the easiest option. Or, they can take the more complicated route of recalculating customized tax withholding on every outgoing employee and give you back something closer to the regular withholding rate, but that’s a more involved and time-consuming process. We could try to explain it in layman’s terms but we’d rather just point you to IRS Publication 15, Circular E with the instructions for companies:
Add the supplemental and regular wages for the most recent payroll period this year. Then figure the income tax withholding as if the total was a single payment. Subtract the tax already withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If there were other payments of supplemental wages (after the last payment of regular wages but before the current payment of supplemental wages), aggregate all the payments, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wages, and withhold the remaining tax.
Let’s just assume that payroll departments are a little busy with all the people they’re processing out (including potentially some from their own group): They’re probably going to just withhold 25 percent and call it a day.
The good news is, you can get a bunch of it back at tax time (several months, if not more than a year later, by which time you’ll probably be amply employed). Plus, you’re doing a bit of good with it now, pumping some cash into the terribly underfunded stimulus package.
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I happened to hear on CNN morning about ressesionwire.com My point to all in society is to Find God that has All Mighty Powers never to allow injustices, hate.
All our money is spent on what God said THOU SHALT NOT KILL. spent on killing humans by war and sucidal bombings.
Some this is wrong with the educatd brain that they cannot tell the Rich that live in million dollar houses with gates around it written private that they dont know who God is. Make time to read the links on immigration , reference and truth will set us all free. Bless you. Love Audrey
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It seems pretty typical of certain professions, that something like severance pay is expected and taken for granted. Fortunately this is a small portion of the higher paid jobs in America. The rest of us understand that severance is not mandatory nor required. It is a gift and in as much whether it is $5 or %5000 it is still a gift for work you never performed. However, we still have those folks who complain about a gift not being enough, or that something was taken out of it. I tend to attribute this to the attitude of the “profession” since the complaints typically come from those who were overpaid to begin with or are the type that expect to get paid first then perform their job. I feel it’s attitude and perspective combined and far too few people ever think about giving their employer a severance or gift when they quit a job but definitely have their hand out when they are fired or laid off.
Indeed Scott… Perception. Too often we feel like we are owed! Truth is employers have families too and they are taking responsibily in the face of crisis.. they are ADJUSTING. What are the employees doing? waiting on hand outs, complaining. Worrying, Crying, Not putting in palce a PLAN.
Employers are trying to keep their busienss alive…. all they have invested in a business they are trying to save. unfortunately that means job cuts…. I encourage individiuals to be realistic and more prudent. everyone sees what is going on… Its not now… It has been over 1 year now… Only the wise would have begun to consider a PLAN B & PLAN C. Severance checks are indeed a blessing.. if used wisely It can offset the cris of Job loss. It can be used to start a business for example.. or be pooled with friends, family to perhaps buy grocery in bulk to take advantage of cheaper prices..(stretch the dollar) To have negotiating power with Business owners who are selling out.
Given the CRISIS… it almost become a blessing that severance is even paid. Think that if things get worse, severance may not even be offered!
How about this thought … Everyone gets 6 weeks instead of 8 weeks… so that everybody can get soemthing..
the little resources can spread to more households…
There are so many other things to focus on …..let’s focus on the solutions and not on the nuances of severances.. ..not on The Obama recovery plan.. Don;t sit and wait on jobs to be created…
Be creative.. Be in action for yourself to POSITION self & family for when this recession is over.. it will be over! Those who plan will be those who come out ahead!.
the Future is a blank slate.. this is unchartered waters.
8 weeks? 6 weeks? Starting a new business? LOLOLOL How about being offered 2 weeks, and only getting 1. That’s more like it.
I was laid off ,in 1984…but could not find work in pittsburgh,moved to new jersey Now I am retired form goverment job,just in time—12-31-2007 was my last day of work…so i can understand what its like to be laid off…this time people will have a more difficult time to find work .so the goverment will have some oppertunities due to massive babyboomer retirement in the next year.
Bridgette, get off your high on life LSD trip and wake up to reality. you sound like one of the @$$ kissers at work who do all they can to avoid responsibility at work as long as you look good doing it. PLAN huh? why dont you PLAN on getting an education before you spout your theoretical nonsense.