Question

What is separation pay?

Answer 1

Separation pay is defined as money or benefits that are paid to an employee who is laid off or separated due to conditions that she cannot control. ... If an employee resigns or quits her job, then she is usually not eligible for separation pay.

Answer 2

Separation pay is payment that an employee can expect to receive after a separation from service. That's when an employee dies, retires or his employment is terminated. An employee can undergo a separation from service if he voluntarily quits or if his position is phased out due to companywide reorganization. However, if the employee leaves his current position and changes his working relationship with the company -- by becoming a freelancer or consultant, for example -- this relationship would not constitute a separation from service.