Strategies for Successful Severance Package Negotiations - Don't Leave Money on the Table

Negotiating a severance package can be daunting, especially when emotions are running high following a job loss. However, with careful preparation and the right strategies, you can maximize your severance benefits. Here’s how to approach severance package negotiations and ensure you don’t leave money on the table.

Before engaging in negotiations, research what severance packages generally look like in your industry, company size, and location. While there’s no one-size-fits-all, typical severance packages might include:

• Salary continuation - Often one or two weeks of pay for each year of service.
• Health benefits - Continuation of medical benefits, often through COBRA, for a specified period.
• Bonuses and stock options - Unpaid bonuses or stock options that might be due, especially if you’re a senior employee.
• Outplacement services - Assistance finding a new job, such as career counseling or resume services.

Understanding industry standards will help you gauge whether the offer is fair and provide a solid foundation for negotiations.

Review your employment contract (if you have one) and any company policies on severance. Some contracts may contain provisions specifying the terms of severance pay, such as a guaranteed amount, bonus eligibility, or conditions under which you’re entitled to severance. Additionally, check if there are company policies or precedents regarding severance packages for employees in similar situations (e.g., layoffs vs. voluntary resignations). These documents can be powerful tools in negotiating a better deal.

Take stock of your financial situation to determine how much severance you really need. Consider the following:

• How long will it take you to find a new job? If you’re in an industry with long hiring cycles or uncertain prospects, you may need more severance to bridge the gap.
• What are your current expenses? Factor in living expenses, outstanding loans, and any dependents who may rely on your income.
• Do you need extended health benefits? If you or your family rely on employer-sponsored health insurance, securing extended coverage may be a priority.

Knowing your financial needs gives you leverage in negotiations and helps you avoid accepting a package that leaves you short during a difficult transition.

While salary continuation is an important part of any severance package, don’t overlook other potential benefits that can add substantial value:

• Health insurance - Negotiate for the company to cover COBRA premiums or extend health benefits beyond the typical duration.
• Stock options/Equity - If you have stock options or equity, ensure that the severance package includes information about what happens to these assets upon termination.
• Non-compete clauses - If you have a non-compete agreement, try to negotiate a release from this clause or adjust its terms to allow you to find new work more easily.
• Outplacement services - These services can be invaluable in helping you find your next job faster, so make sure you’re getting the assistance you need.
• Non-economic terms - Severance agreements typically contain many one-sided terms favorable to the employer. Consider negotiating for them to be mutual.

Severance payments are typically subject to taxes, but you may have some flexibility in how payments are structured. Consider:

• Lump sum vs. installments - If offered a lump sum, consult a tax professional to see if spreading the severance out over time might reduce your tax burden.
• Tax deductions for outplacement services - Some expenses related to job search assistance may be tax-deductible, so factor this into your negotiation.

Being mindful of tax consequences can help you negotiate a severance deal that maximizes your net income.

Timing can be crucial in severance negotiations. If you’re being laid off due to a reduction-in-force or position elimination, you may be able to negotiate for more generous terms if you’ve been a long-term employee or if the company is going through a merger or acquisition. In contrast, if you’re negotiating after voluntarily resigning or being terminated for poor performance or misconduct, the company may be less willing to offer a generous severance package.

Important tip - Don’t rush to sign the severance agreement immediately. Take time to review the offer thoroughly, and consult an attorney to ensure it’s in your best interest.

While it’s possible to negotiate a severance package on your own, involving an attorney can significantly strengthen your position. An employment lawyer can help you understand your rights, ensure you’re not waiving any important legal claims (e.g., claims related to wrongful termination, discrimination, or unpaid wages), and advise you on whether the offer is reasonable.

Attorneys can also help you identify any legal loopholes or opportunities for negotiating better terms, such as a larger severance payment, more extended benefits, or changes to non-compete or non-disclosure agreements.

Approach the negotiation strategically. Be calm and professional, but assertive. Keep these tips in mind:

• Know your worth - Be confident in what you’ve contributed to the company, and be ready to articulate that. Emphasize your long service, valuable skills, or accomplishments that benefited the company.
• Use facts - If you’re asking for a larger severance package, provide solid reasons for your request, such as a high cost of living, long job search duration in your field, or the financial challenges you’ll face.
• Be flexible - While salary is important, being open to other forms of compensation, like additional outplacement services or extended health benefits, can increase the overall value of your package.

If the offer isn’t reasonable or the company isn’t willing to negotiate, know when to walk away. Be prepared to escalate the matter by seeking legal counsel or filing a claim if you believe your termination or the severance offer violates your rights. Sometimes, the willingness to walk away can lead to a better offer from the company.

Negotiating your severance package may feel uncomfortable, but it’s an important opportunity to secure the financial support and benefits you need as you transition to your next career chapter. At a minimum, we strongly recommend scheduling a consultation with an attorney to review your severance package, advise you of your rights and obligations, and handle the negotiations. The Georgia severance package attorneys at Fidlon Legal routinely review, draft, negotiate, and litigate severance agreements for their clients.

Don’t leave money on the table - In most cases, the cost of hiring an attorney is well worth the added benefits, which can have substantial economic value.