How To Negotiate Severance Pay

Having legal discussion

Most people will be let go from a job at some point in their career—and not necessarily because of any wrongdoing on their part. An economic downturn, a company restructuring, or simply a poor fit between employer and employee can all result in a pink slip. Severance pay—that lovely perk where the company extends cash, benefits, or both even though you are no longer employed by them—can help buffer the financial blow of being terminated. There are two times when you can negotiate severance pay: when you receive a job offer and when you’re given the ax. Below are tips for both situations.

Step 1

Negotiating Prior to Accepting the Job.

This is the time when you’re in the strongest position to bargain. Your first step should be to take the emotion out of this process so you can negotiate from a strictly-business mindset. Other tips:

  • Honestly evaluate the worth of your services. Most companies are more willing to stick a severance clause in your contract if you offer unique or particularly valuable services. Go back into “interviewing” mode and impress upon your potential employer how much value you bring to the company and why it’s actually in her best interest to extend a severance package. Also, no matter how great a janitor you are, understand that severance packages are typically extended to those in middle management and above.
  • Don’t automatically toe the line. Some companies outline severance packages in the employee handbook, but if you’re entering a position that’s riskier than others in the company (sales, for instance), you may need a package that’s not one-size-fits-all. In exchange for a cushier severance deal, offer to sign a non-compete. They’ll probably ask you to sign one anyway if clients or trade secrets are at risk, but your offer may sweeten them up a bit.
  • Decide what you want. Most people associate severance packages strictly with money, but severance can also include things like an extension of health insurance for a period of time (say, six months), giving you time to secure a new position and new health benefits.
  • Get it in writing. As with everything else in the business world, a handshake won’t hold up in court. The company may have a reputation for being generous with its departing employees, but don’t gamble what could be a very valuable package on what they’ve done in the past.

Step 2

Negotiating After You've Been Fired.

Naturally, the employee doesn’t have much bargaining power at this stage, but there are still steps you can take to negotiate severance pay. Assuming you have not done anything ethically or legally wrong, the company may be willing to work with you. These tips, as well as the pointers above, may help your case:

  • Play on the boss’ discomfort. No, this isn’t unethical. It’s human nature for employers faced with laying people off to be distinctly uncomfortable with the duty. Tell him how much you’ve enjoyed your time at the company and how dedicated you’ve been for the length of your employment, and ask to discuss a severance package. Be polite and professional during the conversation, but don’t be afraid to press your case. Who emerges as the winner may come down to who can tolerate the awkward situation the longest. 
  • Consider a legal opinion. Yes, it’ll cost you a couple hundred dollars, so you need to decide whether it’s worth the cost. But attorneys who specialize in employment issues can offer valuable insight and suggestions about how to maximize your package.
  • Weigh the offer. Many people who’ve been laid off take the first severance offer that they receive, but it’s called “negotiation” for a reason. Evaluate the offer and decide whether you think it’s the best the company will do for you. You may not be able to talk them out of thousands of additional dollars, but how about low- or no-cost options such as referencing or job search assistance?
  • Be aware of your deadline. Most severance offers expire within a period of time (two to four weeks, typically). Don’t wait too long to respond, or you’ll be out of luck.
  • Recognize that you may give up certain options. When you negotiate for severance (whether in the beginning or at the end of a job), you more than likely give up your right to sue. So if you believe the company has done something wrong enough that you’re thinking of calling in an attorney to litigate your case, accepting a small-potatoes severance package may not be in your best interest.

Jason Kay recommends you read the JobGoRound career and job search blog to keep up with career issues and job search strategies. Also read the latest resume service reviews to help you choose the best resume writing service.

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