What is the required separation pay when an employee is terminated due to establishment closure?

The required separation pay when an employee is terminated due to establishment closure is typically governed by labor laws and regulations, which often stipulate that the amount is correlated with the duration of the employee's service. In many jurisdictions, the standard separation pay is set at one month’s pay for every year of service. This approach is designed to provide a reasonable financial cushion for employees who find themselves unemployed due to circumstances beyond their control, such as the closure of their workplace.

This calculation aims to ensure fairness and support during a difficult transition period for the affected employees, providing them with adequate time to seek new employment opportunities. While other options might suggest different ratios of separation pay, the commonly accepted formula of one month’s pay for every year of service reflects a balance of financial support and recognition of the employee's contribution to the organization over the years.