Prepare Before You Negotiate
A severance package should be evaluated as a complete business and legal transaction, not simply as a number of weeks of salary. The right negotiation depends on the employee's industry, tenure, position, circumstances of separation, existing agreements, potential legal claims, and financial needs during the transition.
1. Understand Market and Company Practices
Start by determining what severance packages typically look like for comparable employees in the same industry and company. Relevant components can include salary continuation, employer-paid COBRA or other health benefits, bonus or commission treatment, equity or stock options, and outplacement assistance. Internal severance plans or past company practices can be particularly important benchmarks.
2. Review Contracts and Policies
Employment agreements, offer letters, compensation plans, handbooks, severance plans, equity documents, and prior promises may create rights or useful negotiating leverage. They also may contain deadlines, forfeiture provisions, restrictive covenants, or repayment obligations that affect the real value of the offer.
3. Assess the Transition Period
Consider the likely length of the job search, ordinary living expenses, family obligations, and the need for continued health coverage. Those practical facts help determine whether the package realistically bridges the employee to the next position and which terms matter most.
4. Negotiate More Than Cash
- Employer payment of COBRA premiums or extended health-insurance support
- Bonus, commission, incentive-compensation, and equity treatment
- Modification or release of non-compete and non-solicitation restrictions
- Reference language and internal/external communications about the separation
- Mutual rather than one-sided non-disparagement or confidentiality provisions
- Outplacement services, transition assistance, and return-of-property terms
5. Consider Payment Structure and Taxes
Severance is generally taxable compensation, but payment timing and structure can affect cash flow and tax consequences. An employee considering lump-sum versus installment payments, deferred compensation, equity, or unusual tax issues should obtain tax advice rather than assuming the gross dollar amount tells the whole story.
6. Timing and Circumstances Matter
A long-tenured employee affected by a reduction in force, merger, or position elimination may have different negotiating leverage than an employee separating after performance allegations or a voluntary resignation. Employees should not sign merely because the employer has imposed an acceptance deadline; the agreement should be reviewed carefully while there is still time to negotiate.
7. Evaluate Released Claims and Legal Rights
Most severance agreements require a broad release of employment claims. Before accepting consideration in exchange for that release, the employee should understand what claims may exist, what remedies could be available, and whether the proposed consideration adequately reflects the rights being surrendered. Age-discrimination waivers and other regulated provisions may have additional requirements.
8. Negotiate Strategically
A strong proposal is factual, professional, and tied to identifiable value or risk. Long service, strong performance, contractual rights, compensation already earned, transition needs, inconsistent treatment, or potential legal claims may all support requested changes. Effective negotiation also means prioritizing the terms that matter most rather than treating every provision as equally important.
9. Know Your Alternatives
If the employer will not improve an inadequate proposal, the employee should understand the consequences of declining the agreement and retaining legal claims. In some situations walking away may be appropriate; in others, negotiated certainty may be more valuable. That decision should be made with a realistic assessment of both legal strength and practical goals.
Fidlon Legal routinely reviews and negotiates severance agreements for Georgia employees and employers. A review can identify hidden restrictions, waived rights, compensation issues, and non-economic terms that may materially change the value of the package.