Here's How to Negotiate a Severance Package

Here's How to Negotiate a Severance Package

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What is Severance?

Although there is not a standard definition for a severance package, it is usually a combination of pay and benefits offered to an employee when they are either terminated or permanently laid off by a company.  Another name for this is a “separation package.” Either way, the package can include:

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What is Severance?

– Continued salary for a certain period – A single lump-sum payment – Payment for remaining vacation days or sick days – Health or life insurance – Retirement savings plan benefits – Stock options – Reemployment assistance or outplacement services

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Does Everyone Get Severance Pay?

The simple answer is no. Just because you're not getting fired for underperforming (or other actions you're personally responsible for) doesn’t mean you’re entitled to any kind of extra pay and benefits. However, under the W.A.R.N. Act (Worker Adjustment and Training Notification), you have some protection. If your organization has over 100 

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Does Everyone Get Severance Pay?

people and is preparing to lay off a lot of people, your employer is required by law to give you 60 days' notice before the company or a large department closes. If your employer fails to give you the required notice, then you are legally entitled to severance pay.

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Why Do Companies Offer Severance?

There are a variety of reasons why a company might offer a severance package. The most common reason is for protection. Companies offer severance pay in exchange for your silence. It sounds dramatic, but it's true. They eliminate the possibility of legal action, especially for things like discrimination, unpaid wages, or wrongful termination. 

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Why Do Companies Offer Severance?

Essentially, the company is looking for a clean breakup between you two. In other circumstances, the severance package might be written into your employment contract. This is one of those rare perks usually only provided to high-level or C-suite executives like the CEO for a new job because they are recruited away from another 

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Why Do Companies Offer Severance?

lucrative job, and part of the leverage a new company has is to offer or guarantee a severance pay in the offer letter.

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How Much Is a Typical Severance Package?

Each company is different, and there is no law that requires a minimum amount. That's why we caution you against comparing your lump-sum severance payment or looking for an exact formula because so many factors go into the final outcome. However, the general practice is to allot 1-3 weeks of your current pay for every year that 

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How Much Is a Typical Severance Package?

you have been employed with the company. For example, if you put in two years of service at the job before being laid off, your employer might offer you two weeks of severance pay at a minimum. Seniority in a job often impacts the length of payment and payment type as well. We recommend starting your negotiation by asking for three 

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How Much Is a Typical Severance Package?

weeks' pay for every year worked and accepting no less than two weeks' pay. If you’re in the middle of a year (e.g., 2.5 years) then take the number of completed months of employment and divide by 12 to figure out the amount you should ask for.

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What's Included In a Typical Severance Package?

Remember that your severance agreement is a legally binding contract between you and the Company, which is why we recommend never signing right away. Take your time to review in detail especially because no two severance agreements are exactly the same. As we mentioned earlier, a severance package might include some of the following:

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What's Included In a Typical Severance Package?

– Continued salary for a certain period – A single lump-sum payment – Payment for remaining vacation days – Health or life insurance – Retirement savings plan benefits – Stock options – Reemployment assistance or outplacement services

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What's Included In a Typical Severance Package?

Even if all severance packages are unique, they almost all contain a General Release.  This is the section where you give up your right to sue the company as well as any legal claims you can make against the company including: – Unpaid minimum wage, overtime, bonuses, and/or commissions – Unreimbursed work-related expenses

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What's Included In a Typical Severance Package?

– Discrimination such as for your gender, race, or a disability – Harassment, including sexual harassment – Defamation – Wrongful termination

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How Do I Negotiate My Severance Package?

1. Know Where The Company Is Starting From Before you start any negotiation, it's good to understand what the other side wants or where they are starting from. In this case, the other side is the company.  Here's what they might be thinking already and the reasons why they might not be eager to negotiate on their original terms.

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How Do I Negotiate My Severance Package?

– Most companies don't offer severance packages to be nice, because they liked you, or as an overall gesture of goodwill. It's a business transaction plain and simple. If you're going to negotiate, simply asking them to increase your severance pay or benefits without a good reason probably will nowhere. – If you threaten a lawsuit as a reason to increase your 

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How Do I Negotiate My Severance Package?

severance pay, it likely won't be taken seriously without additional cause and without representation by an attorney. – Another reason why it might be hard to negotiate with the company is your lack of access to decision-makers. Human resources or your manager usually can't make significant changes to your severance on their own.

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How Do I Negotiate My Severance Package?

2. Distill Your Reasons For Negotiation Even if after reading the above, you still want to negotiate then you first must identify a compelling reason for why the company should provide you with a better severance.  Some compelling reasons could be: – They are not offering a reasonable amount of money 

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How Do I Negotiate My Severance Package?

especially given your time and level at the company – You have a legal claim for discrimination, unpaid wages, harassment, etc. – You want to reduce your unemployment stress – Your access to information they want to keep confidential

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How Do I Negotiate My Severance Package?

3. Make Your Request (Here's How) If you've decided you want to go back to the company to negotiate your severance, make sure you're prepared with the following: 1. Your Specific Asks And Why Spend some time determining what you want to ask for and why. 2. Collect Information from Coworkers

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How Do I Negotiate My Severance Package?

Especially during a merger or company-wide layoff, companies often lay off multiple employees at the same time.  Just like salary transparency is important, it can't hurt to learn about the severance packages being offered to your peers to determine if your offer is fair and if you can negotiate for more. Just make sure they 

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How Do I Negotiate My Severance Package?

haven't signed anything before sharing details with you. 3. Your Bargaining Power Consider what leverage you have in the negotiation.  Things such as: – Your level or number of years with the company – If you were a high-performing employee – If you're going to work for a competitor or have access 

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How Do I Negotiate My Severance Package?

to information they would want to keep confidential – You have a valid threat of a legal claim for discrimination, unpaid wages, harassment, etc

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How Do I Negotiate My Severance Package?

4. The Payment Amount + Length Your company likely used a formula to determine your payment amount and length. We even gave an example of this above. If you feel like the amount and length are unreasonable you can discuss that.  Perhaps you're being let go in the middle of a recession 

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How Do I Negotiate My Severance Package?

with high unemployment, and you can argue that it will take longer to find a new job. If your soon-to-be former company is offering one lump sum of two week's pay, but you've worked there for 10 years, push back. Instead, consider asking for ongoing payments for a set period. This strategy helps stretch the money you receive over a 

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How Do I Negotiate My Severance Package?

longer time and also prevents you from paying more in taxes for the year if the payout is large enough to move you into a higher tax bracket.

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How Do I Negotiate My Severance Package?

5. Benefits + Perks When you’re negotiating your severance don’t forget to think outside the (money) box. If giving you more money is a hard no for your employer, consider the following: – Stock options or a stock plan: Did you get stock options with your company? What happens to them when you leave? 

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How Do I Negotiate My Severance Package?

– Review company policies and decide if this is something you want to negotiate on. – Extending or continuing your health benefits: Thanks to COBRA you can stay on your existing health coverage plan for 18 months and you might want the company to offer continuation payments. You might also ask the company to pay for continued life and 

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How Do I Negotiate My Severance Package?

disability insurance. – Tuition and/or online learning reimbursement: Another thing you might want to negotiate for is the continued reimbursement for any training, online course, or educational classes you're currently taking. Especially if they were skills to help in your job. – Career coaching: You know a job search is in your near 

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How Do I Negotiate My Severance Package?

future and if you haven’t job hunted in a while, it might be nice to work one-on-one with a coach to keep you accountable and some extra help with polishing your materials. – Your exit message: Ask your employer if you can agree on your message for why you were let go (it will come up in future interviews) and ask if you can use them as a reference when applying to jobs.

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How Do I Negotiate My Severance Package?

– Consulting gigs: Perhaps your company has someone going on maternity leave or working on a big project. Can they consider bringing you on for project-based work? – Perks: Have you been using a company laptop or phone? You can see if the company will allow you to keep those, keep paying for any personal items like a gym membership or wellness plan for a certain 

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How Do I Negotiate My Severance Package?

period of time, too. – Commissions and bonuses: Did you meet your quota already or previously promised a performance-based bonus? You can also negotiate to have those payouts included in your severance payment.

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