Tuesday, December 16, 2008

Make Severance Pay Tax free!

We are already seeing lay-offs in India which is quite a new phenomenon for India Shining and there shall be many more in next months if economic downturn or the US recession continues to plague us. All these lay-offs come with severance money to employees facing lay-off, which range from 15 days to 3 months. I think severance money should not be treated the same way as notice pay which is paid to employee when fired for non-performance. Severance is paid when organisation has decided to lay-off people when it decides to take actions which were not foreseen earlier and people being laid-off may not be responsible for it. Hence, government should immediately intervene and bring in standards for deciding severance whereby employees in probation should also be entitled to an equal or higher severance pay than permanent employees as they are less likely to find jobs given their inexperience.

Also, the govt should introduce tax incentives to people facing lay-off as last thing, not only on their severance money but also maybe a tax credit/refund for tax paid in earlier years because in current scenario when everyone if firing/laying-off, majority of these people are less likely to land a job anytime soon and people would definitely like to see a portion of their money coming back which hey paid to government in their good times.

To sum-up, people being laid-off need the help of the govt as the employers are mostly going to be ruthless in paying severance and govt has made good hay in past few years from these employees and it is its time to pay back.

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