Severance pay is a financial compensation provided to employees who are laid off or terminated from their jobs. This payment is typically based on the employee's length of service and may include additional benefits, such as health insurance coverage. The purpose of severance pay is to help ease the transition for employees as they search for new employment. Employers are not legally required to offer severance pay, but many choose to do so as part of their employment contracts or company policies. This practice can help maintain a positive relationship with former employees and enhance the company's reputation in the job market.