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Experiencing termination or “layoff,” especially if it comes unexpectedly, can be devastating. However, your company probably will offer you severance pay. In this article, we explain ways to increase the amount of severance pay.
At Gardner Employment Law, we have years of experience analyzing and negotiating severance agreements. If you have recently lost your job and want to learn about negotiating your severance pay, call us today.
Understanding Your Severance Package
A severance package is an offer from a company to an employee who is leaving. This usually happens because of layoffs, downsizing, or other reasons. This package often includes severance pay, extended health coverage, and additional benefits such as stock options or bonuses.
In return, the employee usually signs a severance agreement. This is a legal employment contract in which the employee agrees to release the company from any future legal actions or claims.
Severance packages can often be negotiated. Employees should not feel pressured to accept the first offer. They should think about whether the terms can be better. Severance packages may seem the same, but you could get better pay, extra benefits, or better terms. This depends on why you are leaving. Knowing what to look for and what to ask for can help ensure you get the best deal possible.
What Are the Key Elements to Negotiate in a Severance Package?
Severance Pay
- Severance pay is often offered at a rate of one to three weeks of pay per year worked, but this amount is usually negotiable. If you were wrongfully terminated, part of a job cut, or had a strong work record, you might ask for a higher payout.
If your departure was sudden, unexpected, or due to reasons outside your control, it’s worth negotiating for extra compensation. This could help bridge the gap while you search for a new job or adjust to a change in income.
Health Insurance
- Employers may offer to subsidize COBRA coverage or extend health plan benefits for a set period. If you are between jobs, have medical needs, or need time to get new insurance, think about asking for extra months of health coverage. This is especially crucial if you have dependents who rely on your insurance.
Make sure to clarify whether the coverage is for just a few months or for a more extended period, as health insurance continuity can be a significant concern during a job transition.
Stock Options & Bonuses
- If you have unvested stock options or a performance bonus, make sure to discuss these during severance talks.
Request that they accelerate any unvested stock options or provide compensation for them. Similarly, make sure you’re compensated for any bonuses or commissions you have earned but not yet received. These benefits could be an important part of your overall compensation package.
Non-Disparagement & Confidentiality Clauses
- Many severance agreements include non-disparagement clauses, which prevent employees from speaking negatively about the company. These clauses may also include confidentiality agreements that prevent the sharing of sensitive company information.
It’s important to ensure that these clauses are mutual. Ask for a provision where the company cannot disparage you either. This protects your professional reputation and ensures that you are not unfairly criticized by your former employer.
Outplacement Services & Unemployment Benefits
- Some companies offer outplacement services, which can assist you in finding a new job. These services may include resume writing, interview coaching, and job search assistance. If these services are not included, consider negotiating for them, as they can help ease your transition.
Additionally, ensure that the severance package doesn’t inadvertently disqualify you from unemployment insurance benefits. It’s crucial to clarify that you will still be eligible for these benefits during your job search.
What Are the Final Steps Before Signing a Severance Package Agreement?
A severance package is rarely a take-it-or-leave-it deal. It’s important to remember that the initial offer is just a starting point for negotiation, and you can often secure a more favorable deal. Before signing any severance agreement, carefully evaluate the terms to ensure they align with your needs and financial goals.
If you are unsure about any aspect of the package or feel that the offer does not reflect your situation, it’s worth consulting with an employment law attorney. A lawyer can help you understand the legal implications of the agreement, advise on potential areas for negotiation, and ensure that your rights are fully protected. With the right approach, you can maximize the value of your severance package and secure a smooth transition to your next career opportunity.
Contact An Expert
Let’s face it – losing your job is hard. Severance agreements can provide significant stability as you look for work and transition into new employment. If you need assistance understanding and negotiating the terms of your severance agreement, we’re here to help.