how to determine severance when firing an employee

A reader writes:

I have just finished reading what you've written on how to fire an employee. Excellent advice. I do have one question. The employee who will soon be “let go” has certainly had many chances to improve, been given objectives and not met them, etc. However, because this person is still human, has a family, is the bread winner, I do not feel right just severing the ties without some sort of departure package. I do have to take into consideration that this person was an under-performer who had plenty of chances and did cost many other employees a lot of time.

Can you make a recommendation as to what I could do as far as pay, if any? We operate based on the hire date so all of the sick time and and vacation time has been used so I can’t use that to “pay out.” Would I just pay two weeks salary and wish them well? Any suggestions, recommendations, words of wisdom would be greatly appreciated at this point. By the way if it is any help, we are a work at will state that has no requirements with the exception of the standards like COBRA.

There's a wide range of standard practice here -- some companies give no severance when someone is fired for cause, some give a couple of weeks, and some are more generous. In deciding what you'll do in this case, here are some questions to consider:

- What precedent, if any, has your company set in similar situations? Legally you're on safer ground if you don't violate an existing precedent (unless you're more generous than that precedent and willing to do that in similar situations in the future).

- How much warning has the person had? Have they had the chance to see the writing on the wall and start job-hunting? Or are they likely facing a long job search that they haven't had any notice to start yet?

- Are you worried about the employee retaliating in some way, such as through (hopefully frivolous) legal action? If so, severance can be a good incentive for him not to do that -- since to receive severance, employees typically have to sign a general release, releasing the company from any future claims.

- What can you afford to do? This is the biggest one. I tend to think that if you can afford to be generous, you should be. (Without knowing factors like the length of employment and nature of the problems, I'd consider two weeks' pay to be reasonable and one month or more to be generous. I'd also consider zero to be defensible in many circumstances.) If you can afford to be generous, it's the compassionate thing to do.

Advice from anyone else?