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Thursday, July 21, 2011

Severance Payments for Local Hires

The question of allowability of severance for locally hired personnel often comes up on USAID programs, both contracts and grants/cooperative agreements.

The allowability is governed by FAR Subpart 31 (FAR 31.205-6 Compensation for Personal Services, (g) Severance Pay), Cost Principles for for-profits– and A-122 or 2CFR230 Cost Principles for non-profits (Appendix B, 18. Compensation for Personal Services) which say essentially the same thing and require prior approval of the funding agency for any severance payments, - an approval to be given under assurance that the company extends the same benefits to its US employees in similar positions.