Don't Leave Empty-Handed... How to Negotiate a Severance Package

severance package negotiations Don't get mad, get severance! Who isn't upset when they hear the news that they're being laid off? Instead of getting angry and storming out, or going quietly into the good night, the best thing to do is keep your cool and negotiate. Many people are not aware that in some cases, you don't have to silently accept what they offer you -- you can negotiate for more.

So what exactly are you entitled to when you're laid off?

"If you don't have a contract or union, you're considered an 'at-will' employee," says Charlene Simons, a human resource specialist. "That means they can fire or let you go without cause [except for some federal and state exemptions such as race, gender, discrimination etc.]. Most don't even have to give you unused vacation pay, but they usually do." Either way it never hurts to ask.

Learning the hard way

Peggy Nolan did. She was a senior project manager at a major financial company who had recently been diagnosed with breast cancer and was facing surgery when her company laid off her entire group. She had already gotten approval for short-term disability, but the thought of having astronomical COBRA payments was too much. " I decided it was in my best interest to negotiate a better severance package for myself because I needed health insurance not just for me but my two daughters as well," she says.

"Severance packages are not available to just any worker; it depends on whether you're hourly or in management, and it's up to the discretion of the employer," continues Simons.

Nolan agrees. "Circumstances are going to be different for everyone; however, if you feel the package is unfair or too low, negotiate!"

Severance can be a lump sum payout based on number of years worked and it might include the company paying for a few months of your COBRA premium. If a company is going out of business, however, you may not get anything regardless of your work history.

Neither are you likely to receive any severance if the company goes bankrupt. "That happened to me in 2002. The company gave me two weeks severance -- and even that got caught up in bankruptcy!" says Nolan.

This time around, though, Nolan steeled herself and negotiated. "I asked for a severance package that included six months of salary, my bonus paid in full for the previous year and the remainder of my bonus for the year before that."

What she got was four months severance, seven months of COBRA premiums paid at the family rate, and the bonus for the previous year. "The bonus from the year prior required a bit of haggling and in the end, the company cut me a check for 75 pecent of it. Having my COBRA premiums paid by the company was huge for me and more than offset not receiving a full six month severance payment," notes Nolan, who now runs a website for stepmoms.

More considerations for a severance package

Some other items to include in a severance package:

  • Written letters of recommendation. "This is important because getting a new job very often depends on a call to your old one and you don't want them getting the wrong impression about why you were let go," advises Simons.
  • If you worked in a job that that prevents you from working in a similar field for a period of time -- e.g. technology or broadcast media -- make sure you are cleared to seek work immediately in the same field.

Like Nolan, you have nothing to lose by asking. " If I asked, I had a 50/50 chance of getting a better package. If I didn't ask, I had a zero percent chance of getting something better. So I asked. And I got something better than what I asked for," she notes.

The moral of the story: When in doubt, ASK.

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