A severance package is an agreement between an employer and an employee that provides benefits when a job ends. While not all companies must offer severance, the terms are often negotiable. Understanding the components of a package and how to approach the negotiation can help you secure a more favorable outcome.
Understand Your Starting Position
Before engaging in any discussion, thoroughly review the initial severance agreement offered by your employer. Do not sign anything immediately; you have a window of time to consider the offer, which can be up to 21 days in some situations, so confirm the deadline with human resources. This period is your opportunity to gather information and assess your position.
Your analysis should begin with your employment documents. Locate your original employment agreement or offer letter, as it may contain specific clauses about severance the company is obligated to follow. The employee handbook or other company policy documents might also outline standard procedures for layoffs and severance, providing a baseline for what you should expect.
Assessing your leverage is a part of this preparatory phase. Consider your length of service with the company, as many severance formulas are based on tenure. Your performance record can also be a tool in negotiations. If possible, discreetly try to learn what packages colleagues in similar roles have received, as this can establish a precedent. You should also be aware of broader legal protections, such as the Worker Adjustment and Retraining Notification (WARN) Act.
Determine What to Negotiate
A severance package is a collection of benefits that can be negotiated to better suit your needs. While the cash payment is a central element, other components can provide significant value as you transition to a new role.
Severance Pay
The core of most packages is the severance payment, often calculated based on your years of service. A common starting point is offering one to two weeks of pay for every year you were employed. However, this is not a rigid rule and can be a primary focus of your negotiation. To formulate a counter-offer, consider factors like your position, industry standards, and the time it may take to find a comparable job. If you are in a specialized field or a senior role, you can reasonably argue for a more substantial payment.
Health Insurance Continuation
Losing a job often means losing employer-sponsored health insurance. Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), you are entitled to continue your health coverage for a period, but you must pay the full premium yourself. These premiums can be expensive, so a negotiating point is asking the company to pay for some or all of your COBRA premiums for a set number of months. This can provide significant financial relief.
Outplacement Services
Companies sometimes offer outplacement services to help departing employees find new work more quickly. These services can include resume writing assistance, career coaching, and interview preparation. If these services are not included in your initial offer, you can request them. They represent a non-cash benefit that can be valuable in accelerating your career transition.
Unused Paid Time Off
Your entitlement to a payout for unused vacation, sick, or personal days depends on company policy and state law. Some states mandate that companies pay out accrued vacation time upon termination. If your company’s policy is unclear or does not include a payout, you can negotiate for it to be included, which can add a considerable amount to your final compensation.
Letter of Recommendation and References
You can negotiate the terms of your departure to ensure a positive or at least neutral reference. This can involve requesting a formal letter of recommendation from your direct manager. You can also secure an agreement that the company will only confirm your dates of employment and job title when contacted by potential employers. This helps control the narrative around your exit.
Non-Compete and Non-Disparagement Clauses
Severance agreements often require you to sign clauses that limit your future actions, such as non-compete and non-disparagement agreements. A non-compete clause can restrict your ability to work for a competitor for a specific period and geographic area. You can negotiate to have the clause removed or to limit its scope. A non-disparagement clause prevents you from speaking negatively about the company, and you should ensure this obligation is mutual.
Develop Your Negotiation Strategy
With your research complete and priorities identified, develop a clear negotiation strategy. The goal is to present your case in a calm, reasoned manner, avoiding emotional responses. Your approach should be collaborative, framed as a request to find a mutually agreeable solution.
Formulate a specific, written counter-offer. Do not just say you want “more”; detail exactly what you are asking for, such as additional severance pay, COBRA premium coverage, or the removal of a non-compete clause. This written proposal provides a clear starting point for the discussion and should be polite and concise.
Alongside your counter-offer, create a list of talking points that justify your requests based on the leverage you identified earlier. This can include your years of service, positive performance reviews, or industry norms. When you are ready, formally request a meeting with the appropriate person in HR or management to discuss your agreement.
During the conversation, listen carefully to the company’s response and be prepared to be flexible. The company may not agree to all of your requests, so it is helpful to have prioritized your asks in advance. If they present a revised offer, do not feel pressured to accept it on the spot. Ask for time to review the new proposal, and ensure that any verbal agreements are documented in an updated written offer.
Reviewing the Final Agreement
Once you have reached a tentative agreement, meticulously review the revised severance document before signing. This is a legally binding contract, and your signature confirms your acceptance of all its terms. Ensure that every negotiated point is accurately reflected in the text. Any verbal promises that are not in the written agreement are not enforceable.
A standard part of any severance agreement is the “release of claims” clause. By signing this, you are forfeiting your right to sue the company for any past events, including potential claims like wrongful termination or discrimination. It is important that you understand the breadth of the rights you are giving up.
Given the legal weight of this document, it is highly recommended that you consult with an employment lawyer to review the final agreement. An attorney can help decipher complex legal language, identify unfavorable terms, and advise you on whether the agreement is fair. They can assess the strength of any potential legal claims you might be waiving and help you understand if the package offered is adequate compensation. Their expertise can provide peace of mind and protect you from unforeseen consequences.