13 Mar How To Create A Severance Pay Package
Churches exist to help people by sharing the good news of the Bible. And churches hire people to facilitate the process of making church happen. However, there are times when an employment relationship doesn’t work out. Sometimes, the employee fails to meet ministry expectations; sometimes, an employee breaches defined policies and procedures; and sometimes, it is a financial issue that leads to termination.
Regardless of the reason, no church ever hired an employee expecting to let them go. The difficult reality is that there are times when churches need to terminate an employee. This is when severance pay might help ease the transition.
Severance Pay Can Ease The Transition
Churches, in particular, should (at least consider) offering severance pay to an employee who leaves involuntarily because of the reality that most church employees don’t qualify for unemployment benefits. A severance pay package can help bridge the gap in pay for church employees who leave employment involuntarily.
While this is not a required benefit, it is sometimes simply the right thing to do regardless of the reason an employee leaves employment. For most churches, the need for a benefit like this will be rare, but taking the time to at least consider it will help you be ready should the need to use a severance pay package ever come up.
8 Things to Consider When Developing a Severance Pay Package
1. Employee Tenure
The length of time an employee is employed should be a consideration for offering a severance pay package. Your package will be considerably different for an employee who has been with the organization for less than a year as compared to someone who has worked for the church for a decade or better.
For instance, let’s assume you have to make difficult budget cuts, and a few church jobs will need to be eliminated to meet the new budget. Consider those employees who will be losing their jobs and how long they have been with the ministry when determining severance pay.
Take the time to determine how long an employee should be on payroll before qualifying for severance pay. For instance, you might offer a week of pay for each year of service.
2. Employee Position In the Church
Churches hire a wide variety of employees with different skill sets. While the position may not dictate what the benefit is, it may dictate additional available resources for the departing employee. Create a basic severance package that all employees qualify for and additional benefits for higher-level positions. For instance, an Executive Pastor might receive the basic severance package but may also be offered an outplacement service to help with resume writing, interviewing help, and job search.
3. Unemployment Benefits
Severance pay can help employees who would not be able to take advantage of state unemployment benefits. If your church does not carry unemployment insurance for staff, a severance pay package may simply be the right thing to do. Most people are surprised to learn that church employees don’t qualify for unemployment benefits when they lose their jobs involuntarily. Even with low unemployment rates, it takes time to find a job.
Bridging this gap in compensation can be the difference between a family struggling or making a smooth transition without the help of unemployment benefits.
4. Available Budget for Severance Pay
At the end of the day, if there is no budget, you probably can’t support a severance package. If an employee is asked to leave and the salary is already factored into the church budget, extending the employee’s pay for a few weeks or months may not be a deal breaker. However, adding other benefits to the package may be.
Outplacement services and counseling can come with a cost. If there is a budget for this, it can help an employee through a difficult job transition.
5. What to Include in a Severance Package
Determine what to include in the package by establishing your budget and reviewing the paid benefits that the employee receives. Often, severance packages will include full pay, paid insurance premiums, and continued contribution to retirement for the length of the severance agreement. These benefits may extend into outplacement services that help with resume writing and job search. Counseling is often another benefit that can help the employee with the transition.
Create a policy that outlines the length of the package and the paid benefits that are included. For instance, employees receive X number of weeks for every X number of years employed. The extent of the package offer often depends on the available budget, the position the employee holds, and the length of tenure.
6. Communicate Clearly
Be sensitive to an employee who will be receiving a severance benefit. Their world has been turned upside down, and they may have difficulty hearing everything you say. Be kind, direct, and detailed in what is communicated to the employee.
Create a document that they can take with them that explains the process, contacts you may be providing, and what they can expect from you while going through the process. Provide a contact within the church office who they can go to with questions or concerns about the package.
7. Maintain Confidentiality
The details of a severance package is no one’s business. Be sensitive to the employee and maintain confidentiality of the severance details. Share only with those who have a need to know. For instance, the accounting department may need to know how long the employee will remain on payroll. But the busybody down the hall has no need to know that information.
8. Legal Consult
Employment laws can vary. So, as with anything that intersects with employee and employer relations, it is always wise to consult a labor law expert. This expert can help advise, create a severance agreement, and implement a severance package that is fair and within the mandates of the state law.
A Severance Package Can Bridge The Gap
Anyone who has ever had to terminate a church employee understands the challenge of having a very difficult conversation. However, you can lessen the blow by creating a severance pay package that shows the love of Christ and helps bridge the employment gap.
You can access a sample severance pay policy in our library of church forms, documents, and job descriptions here.
Original content by the Smart Church Management. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.