Receiving a severance package after a layoff provides a financial cushion, but the initial offer is often just a starting point. This moment presents an opportunity to advocate for yourself. Negotiating your severance is about ensuring the terms of your departure are as fair as possible and support your transition to the next stage of your career.
Understand Your Severance Offer
A severance agreement is a legal document outlining the pay and benefits an employer provides upon departure. Companies offer these packages to maintain a positive public image, foster goodwill with remaining employees, and secure a release of legal claims. By signing the agreement, you are waiving your right to sue the company for any reason related to your employment or termination.
A standard package includes a specific amount of severance pay, often calculated based on your years of service. It also details the status of your health benefits, accrued vacation pay, the handling of vested stock options, and clauses related to confidentiality.
Federal law often requires employers to give you at least 21 days to review a severance agreement, extending to 45 days in a group layoff. This time is yours to use for careful review and to consider your options without feeling pressured to sign.
Assess Your Leverage
Your ability to negotiate a better package hinges on the leverage you possess. Start by collecting all relevant documents, including your original employment contract, offer letter, and any company handbooks or policies that mention severance. These documents establish the baseline of what you might be entitled to.
Your performance history is a strong negotiating tool. Compile your past performance reviews, especially those that highlight exceptional contributions and positive feedback. Quantify your achievements wherever possible, such as revenue generated or costs saved, to provide a concrete basis for a more substantial package.
The length of your service is another significant factor, as a long-tenured employee can often justify a larger payout. Finally, consider the circumstances of your termination. Your case for a better package is different if your role was eliminated in a restructuring than if the termination was performance-related.
Identify What to Negotiate
While the monetary figure is an obvious target, a comprehensive severance package has many components that hold value. Expanding your focus beyond the base pay can lead to a more valuable overall agreement that addresses your financial and career needs.
A. Severance Pay
The most common negotiation point is the amount of severance pay. Many companies use a standard formula, like one or two weeks of pay per year of service. You can counter this by requesting a higher multiple, justifying it with your seniority, performance record, or industry standards.
B. Health Insurance Continuation
Maintaining health coverage is a major concern. Since you are entitled to continue coverage through COBRA, a point of negotiation is asking the employer to pay for some or all of your premiums for a set number of months.
C. Outplacement Services
Companies sometimes offer outplacement services like career coaching and resume writing assistance. If these are not offered, you can request them. If they are, you can negotiate for a longer duration of support or for a higher-tier service provider.
D. Non-Compete and Non-Solicitation Clauses
Severance agreements often include restrictive covenants like non-compete or non-solicitation clauses. You can negotiate to have these clauses removed or to narrow their scope, for example, by limiting the geographic area or time frame.
E. Future References
How your former employer responds to reference checks is important. You can negotiate for the company to agree to provide a neutral reference, confirming only your dates of employment and job title, or agree on the language of a positive reference letter.
F. Vesting of Stocks or Bonuses
If you have unvested stock options, RSUs, or are leaving before a bonus is paid, this is an area for negotiation. You can ask the company to accelerate the vesting of your equity or negotiate for a prorated portion of your anticipated bonus.
Execute the Negotiation
Once you have assessed your leverage and identified your specific asks, execute the negotiation professionally. Politely inform your HR contact that you need time to review the document thoroughly. This is a standard step that gives you space to prepare a thoughtful response.
Your counteroffer should be presented in writing, via a professional and unemotional email. Begin by expressing gratitude for the opportunity you had at the company before transitioning to your counterproposal. Maintain a collaborative tone, framing the negotiation as a problem-solving discussion rather than a demand.
When you present your counteroffer, connect your requests directly to the leverage you have gathered. For instance, you might write, “In light of my ten years of service and my consistent record of exceeding performance targets, I would like to propose an adjustment to the severance pay.” Clearly state your desired terms for each component you wish to negotiate.
Know When to Involve a Lawyer
While you can often negotiate effectively on your own, there are situations where seeking legal counsel is advisable. If the language in your severance agreement is confusing or the terms are highly restrictive, an employment attorney can help you understand the full implications of what you are signing.
You should strongly consider hiring a lawyer if you suspect your termination was illegal. This includes situations involving discrimination based on age, race, gender, or religion, or if you believe you were fired in retaliation for a protected activity, such as whistleblowing. An attorney can evaluate the strength of these legal claims, which represent a source of leverage.
If your employment contract is complex and involves significant equity, bonuses, or restrictive clauses, legal advice is recommended. An experienced severance attorney understands how to value these components and can position your negotiation to maximize the outcome. If the company is unwilling to negotiate on reasonable terms, having a lawyer represent you can signal that you are serious.