In an increasingly unpredictable job market, knowing how to face layoffs and navigate severance negotiations is a necessary skill. According to a recent JustAnswer survey, “58% of people who received a severance package when laid off did not negotiate that package.” Despite that high number, severance negotiations are not a lost cause.
Sho Dewan, career coach, founder and CEO of Workhap, and Merry A. Kogut, a licensed attorney based out of Washington, shed light on the process, debunking misconceptions and providing essential advice to allow employees to confidently enter their severance negotiations.
What is severance pay and when is it due?
“Severance pay,” Kogut explains, “is monetary compensation that an employer may provide to an employee when terminating them from their job. Although some employment agreements mandate it, few employers offer it to ‘at will’ employees at the time of termination—employees may need to request it and negotiate receiving it.”
So who exactly is due severance? Kogut clarifies that employees are only “due” severance if it is promised in an employment contract, handbook or policy. Most employees who lose their jobs are likely “at will” employees—those who can be dismissed without any legal requirement for cause. Unless protected by specific laws or contracts, they have no legal right to severance.
The power of negotiating severance
If you are due severance, Dewan notes that the most common mistake made by employees is not negotiating at all. “They accept the first offer as is and think that’s the best they can get,” he says, highlighting that employees can, and should, ask for more.
Contrary to popular belief, there is room for negotiation when it comes to severance packages. It’s not a fixed offer that you must accept as-is.
There are several factors that can influence the amount of severance pay you might receive. Some factors that Kogut mentions include job position, length of service, pay rate, employment contract or company policy and reason for termination. Leverage these factors, and remind your employer of your achievements, dedication and loyalty during the negotiation process.
When presented with an offer, Kogut emphasizes the importance of not signing the severance agreement immediately, advising employees to take the time to consider the offer and possibly consult with a legal expert who specializes in employment.
Dewan agrees. “Don’t sign anything immediately. Take your time with it; process your emotions,” he says. He encourages employees to compose themselves and approach severance negotiations with a clear head.
Preparing for severance negotiations
The key to successful negotiations is preparation. Although layoffs may come as a shock, leaving individuals emotionally overwhelmed and managing a sudden lack of income, it’s important to be prepared. When you’re ready, make a list of items you want to negotiate. Review the terms in your employment contract or your employer’s policies, and be ready to highlight your accomplishments and contributions.
Employees should “write out a list of points they wish to discuss at the meeting,” Kogut suggests. Prioritize and shorten the list to keep the discussion focused on important items.
Money, however, is not the only negotiable part of a severance package. You can negotiate quite a few aspects of your severance. A few examples that Dewan lists are additional severance pay, payout for unused vacation days, career coaching and an extended period of health benefits and insurance. Kogut adds that letters of reference, unemployment insurance, pension benefits and a mutually agreeable last day are other negotiables.
Once you have your list ready, it’s time to meet with HR. When meeting with HR, the first step is to hear their initial offer and assess its fairness. Not everything needs to be negotiated, Dewan explains.
“If it’s a fair offer and you agree with it, it’s perfectly OK to accept,” he says. “But it is helpful for you to know the different things that you want.”
Critical aspects of negotiating severance
When entering into negotiations with HR, Kogut cautions employees to take extra care in two specific situations.
Firstly, employers may require the signing of a release holding the employer harmless for any and all liability. In many cases, this would prevent the employee from bringing any legal action against the employer. Secondly, severance packages may include a noncompete provision that could limit future employment opportunities. Both these aspects warrant careful review with an attorney prior to signing an agreement.
A note to employers
For employers and business owners alike, navigating layoffs and severance negotiations can be a tricky task. Dewan’s advice is to remember the impact you can have on departing employees. “Just remember that how you leave an organization is often how you remember it,” he points out, underlining the importance of making the experience as neutral (if not positive) as possible, as employees may remember the experience for the rest of their lives.
“Have some empathy here,” he advises, noting that layoffs are often unexpected and can have a significant financial impact on employees. Even if the employee negotiates a few things, make an effort to hear them out and strive for an agreement that feels fair to both parties.
Coping with layoffs
Dewan urges anyone impacted by layoffs or going through severance negotiations not to take the situation personally. “Oftentimes, you being chosen for these layoffs is not necessarily about you or your skills. It’s most often just not the right fit,” he says.
The key is to believe in your skills and abilities and know that better opportunities lie ahead. “Do your best to stay positive and make this a win-win situation,” he advises.
While it may be a challenging process, knowing your rights, understanding what you can negotiate and approaching the situation with a clear mind can make a significant difference in the outcome of severance negotiations.
Photo by Drazen Zigic/Shutterstock
Iona Brannon is a freelance journalist based in the U.S. You can read more of her work at ionabrannon.com.
