An organization under federal jurisdiction terminates the services of an employee who has worked for 7 years. The employee's daily wage is $100. How much severance pay is the employee entitled to?

• A. $1000
• B. $1400
• C. $2000
• D. $3500

Answer: (B)

The amount is based on the rule that federally regulated employers pay severance equal to one week of wages for each year of service, up to a maximum of 26 weeks. With a daily wage of 100 dollars and a typical 5-day workweek, weekly earnings are 100 × 5 = 500 dollars. For seven years of service, the employee is entitled to seven weeks of pay: 7 × 500 = 3,500 dollars. So the severance would be 3,500 dollars. The figure of 1,400 would require a different interpretation of the weekly pay (for example, assuming fewer than five working days per week), which isn’t the standard federal rule.