Managing a workforce is a tremendous responsibility for business owners. In addition to making strategic hiring decisions, situations will inevitably arise in which an employee separates from the company.

If you let a Texas employee go, you have a legal obligation to provide his or her final paycheck within six calendar days. If the employee quits, retires, resigns, or in any way leaves voluntarily, final pay is due on the next regularly-scheduled payday following the effective date of resignation. Texas employment laws do not require you to provide severance pay unless you made an offer specifying severance in advance. However, could spending more money on former employees work to your benefit?

A severance package could work to your company’s advantage

Compensation beyond what an employee earned may factor into your decision about eliminating positions or the need for layoffs, as well as your choice to fire someone. But, if the law does not require you to pay more, why might you volunteer an additional expenditure?

For one, a signed release from claims and legal action in return for severance protects your interests. It is important to give consideration, such as severance pay, in return for a release. Such an arrangement can minimize your risk of facing allegations related to harassment, discrimination or wrongful termination, to the extent such claims can be released by the employee.

Another reason is that job applicants want security. Showing the marketplace and your remaining workforce you are willing to provide additional funds beyond termination could show your commitment to developing those in your employ. It may also suggest your business has a healthy outlook.

Your company’s circumstances and financial standing may determine the type of package you choose to offer former employees. Meanwhile, understanding your options could ultimately result in cost savings and help ensure you fulfill your legal requirements as an employer.