06 Jul When paying severance, which is better: one lump sum or monthly payments over a set time period?
Question: “When paying severance, which is better: one lump sum or monthly payments over a set time period?”
ANSWER: Generally, we recommend organizations provide severance spread out rather than one chunk amount because it encourages a continued amicable relationship between the church and the leaving employee.
It also keeps the departing employee financially taken care of for the time period you planned on and forces them to stay on their current budget rather than them blowing all the money right away then coming back to you for a financial need.
Since churches are automatically exempt from Unemployment Insurance and rarely voluntarily opt in, an unemployment issue is not as much of a concern. However, if there is not a concern about things going south, you can give severance in one chunk amount.
Remember, though, bigger payments tend to be taxed more. To the IRS it will look like they got a huge raise and might push them to another tax bracket. If you have the option to adjust the taxation when you run their severance payment, do so to help them out.
Original content by the HR Ministry Solutions. 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.