Can be a combination of reasons. If somebody has been made redundant, there can be a legal obligation like statutory redundancy pay in the UK. Contracts also sometimes include severance pay clauses on top of legal obligations, and they're usually there as something to entice somebody to want to work for a company to begin with.

Somebody in a high-up position will have negotiated their own contract. If its a position that carries a risk of getting fired if things don't work out they will have included compensation for that. If it's for a fixed term, just like your mobile phone contract it could include the value of the contracted payments until the term is up.

Define "fired"?

Most states in the US are "at-risk" employment, meaning they don't need to provide any reason at all to terminate you. If they are terminating you and you specifically for whatever reason, that's "firing" (as opposed to lay offs).

You can be fired "for cause" which means you done fucked up and there is no compensation typically given for that. It's more of a "don't let the door hit you on the way out" type scenario.

You can also be fired "without cause", that doesn't mean you necessarily did anything wrong, they just don't want you to work for them anymore. There is typically some sort of severance given for many reasons, depending on how cynical you are.

1. Companies may be heartless but managers not necessarily so. Getting fired sucks and their at least making an effort to keep you on feet and minimize the impact to your life.

2. Sometimes there are actual laws stipulating severance for termination with-out cause. Similarly there are laws stipulating unemployment benefits for termination as well, in many areas you cannot file for unemployement benefits if you've been terminated with cause.

3. Companies understand that people who get fired are likely to sue their employers. Often these payout packages come with legal agreements that the person cannot sue their employer if they accept the money. Do the math and it's cheaper to pay many people a little bit of money to not sue, than it is to pay for all the lawsuits.

Are you talking about severance? There is usually a contract that goes along with it, often times preventing the employee from suing, working for a competitor, or talking publicly about the layoffs. Or if a company is doing poorly, the severance is incentive for the remaining employees to not look for new work as the boat sinks. If your coworker received 20k for getting fired, you're going to stick it out in hopes they lay you off next.

There's a few possible reasons

1. If the person is laid off (the position is made redundant) there may be Government mandated compensation for that person. For example 1 week of pay for every year worked. This is to protect workers from being laid off on a whim, the company can't just let their workers all go without any penalty.

2. Some companies have contracts that offer severance pay to long time workers if they are terminated. It's a bonus of working there, and is meant to thank them for long time service and help them find a new job. Often this is a Union benefit.

3. Often unused vacation, pensions, and other bonuses accumulate and have to be paid out if the person is terminated.

4. High level Executives are notorious for including clauses in their contracts that they must receive payment based on the remaining time on their contracts if they are fired. These are referred to as Golden Parachutes and are the result of executives getting to effectively write their own contracts. So even if a manager fails at their job catastrophically, a company may be forced to 'buy them out' of their contract to be rid of them.

• It's in their contract.
• You'll only see this for people who are way high up.
• The only way to get them to accept the job is to agree to pay a certain amount if they are ever fired for certain reasons.

Do you mean “at-will” employment, not “at-risk”?

This is good. I would just add that in many cases companies will make a severance payment in exchange for a waiver of claims. Better to pay someone $5k or $10k to leave on good terms than have them leave on bad term and find a lawyer to bring a wrongful termination claim. That amount can be plowed through very quickly in legal fees.

I'm married to one of these people...I think of it like professional sport coaches or managers....they get fired a lot! Sometimes it's not even anything they did, just someone else bought the company and wants their own person in charge. My spouse's highest annual income, 7 figures USD...was the year they were made redundant.

It depends what is meant by 'huge' payouts. When layoffs occur, it isn't uncommon to receive a severance payment, even though they may not be required to. I personally received a 5 figure one when I was laid off. Not a fortune, but definitely helped.

Because usually the contract with that person when you hired them, says so. It's usually something like, if they are fired in the first X years of employment with the company, they are entitled to a certain amount of payment as a buyout.

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I thought that they were just being cheeky

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