Receiving a severance offer after a job loss is the beginning of a business discussion, not a final decision. The initial offer is often a starting point, and negotiation is possible. Approaching the situation strategically empowers you to secure terms that better support your transition to a new role by professionally advocating for your interests.
Understanding Your Severance Agreement
A severance package is an agreement between an employer and a departing employee that outlines the obligations of both parties. A central element is the “release of claims,” a promise by the employee not to pursue legal action against the company for any past events. In exchange for this release, the company provides the severance package.
Common elements include severance pay, which is often calculated based on your length of service. The agreement details your health insurance status, including your rights under the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows you to continue your health coverage by paying the premiums yourself. Some packages may also include outplacement services to help you find a new job through career coaching or resume assistance.
Determining Your Leverage
A company’s willingness to negotiate is a business decision. The primary incentive for an employer is to secure a signed release of claims, protecting them from potential lawsuits. They may also wish to maintain a positive reputation, both internally with remaining employees and externally, by ensuring departing employees are treated fairly.
Your length of service and a history of strong performance reviews are significant assets. Positive relationships with senior leaders can also play a role in the company’s willingness to be flexible. The context of your departure matters; if you are part of a large-scale layoff, there may be less room for individual negotiation, but certain laws could still provide leverage. For instance, the Worker Adjustment and Retraining Notification (WARN) Act may apply in mass layoff situations, and the Older Workers Benefit Protection Act (OWBPA) grants employees over 40 a minimum of 21 days to review a severance offer.
What You Can Negotiate
While the cash payment is a focus, it is not the only negotiable element. Broadening your request beyond money can increase your chances of success, as non-monetary items are often easier for a company to concede.
- Severance Pay: Request a larger sum based on your tenure, contributions, or the anticipated time it will take to find a new position.
- Healthcare Coverage: Ask the company to subsidize your COBRA health insurance premiums for a set number of months.
- Non-Compete and Non-Solicitation Clauses: Negotiate to have these removed or to reduce their scope, such as limiting the geographic area or the list of restricted competitors.
- Vesting of Stock Options or Retirement Contributions: Ask for the departure date to be officially moved to allow stock options or 401(k) contributions to vest.
- Outplacement Services: Request services like career coaching or resume writing if not offered, or ask for the duration of these services to be extended.
- A Positive or Neutral Reference: Formalize the type of reference the company will provide to potential future employers.
- The Timing of Your Departure: Adjusting your official termination date can have implications for pay, benefits, and the vesting of assets.
How to Negotiate Your Severance
Handle the negotiation process in a professional manner to maintain a constructive dialogue. Present your counteroffer in writing, typically via email, to ensure there is a clear record of all communication. This prevents misunderstandings and documents any agreements that are reached.
Begin your communication by expressing gratitude for the job opportunity and the initial severance offer. This sets a professional tone and shows you are approaching this as a reasonable discussion. Following this, clearly and concisely state the specific changes you are requesting, referring to items like the severance amount or modifications to restrictive clauses.
For each request, provide a brief and factual justification connected to the leverage you identified earlier. For example, you might write, “Given my 12 years of dedicated service and consistent high marks in performance reviews, I am requesting an additional four weeks of severance pay.” Do not sign any agreement until all negotiations are complete and you have a final document that reflects all agreed-upon terms.
When to Consult an Attorney
While many negotiations can be handled directly, some situations require legal advice. An attorney can help you understand complex legal language and assess the fairness of the offer. If you suspect your termination was based on discrimination or was in retaliation for a protected action, such as reporting harassment, consulting a lawyer is highly recommended.
You should also consider legal counsel if the agreement contains overly restrictive or confusing clauses. A non-compete clause that is excessively broad could unfairly limit your ability to earn a living and warrants a legal review. Another red flag is if the company pressures you to sign the agreement immediately, especially if you are legally entitled to a longer review period.