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Severance Package

These are being more commonly offered as a cash lump sum which will be based on your years of service with the company. This payment can be made as a lump sum payment or you may be given the option to take this in instalment payment sums which will be made over a period of time. The second option means it is more like continuing to draw a salary. Both these options have pros and cons you will need to look at them to decide which the better option is

Lump Sum

  • This will be taxed as it is considered income
  • It can be deferred to the next financial year but will still affect your tax
  • You can repay major debts i.e. mortgage to reduce the interest you need to pay on that.
  • You will need to consider if you think the company is going to go into insolvency if it is best to receive the lump sum before they go.

Instalments

  • You will still be taxed on these small payment however they will be lower
  • If you want and find another job you may be able to transfer your pension plan across and continue contributing to it
  • You may believe that the company will be able to honour the payments over the years as they are a multinational corporation who are unlikely to fold.

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