We all know that you can negotiate your salary — but can you also negotiate a bigger payout if your company decides to let you go? While an upgraded severance package is far from a sure thing, most experts agree that it’s always worth asking about.
“Everything is negotiable,” says Labor & Employment Attorney Alex Granovsky of Granovsky & Sundaresh PLLC. “Your employer is (probably) not offering you a severance [package] to be nice. While there is usually money involved, don’t forget that your employer is getting something from you too. Your employer is paying [you] to shut up, go away, and never sue the company. If you understand what your former employer’s needs are, you can leverage your unique position.”
The trick, of course, is knowing how to do it the right way — you can’t exactly march into your HR manager’s office and refuse to leave the building unless your terms are met. As with negotiating your salary, negotiating a severance package requires tact and strategy. If you really want to guarantee a comfortable financial cushion after being ousted from your job, follow these best practices.
1. Understand Your Leverage
Before you enter severance package negotiations, it’s important to realize how much sway you actually have — which is largely dependent on the circumstances of your departure.
“For example, if the departing employee is leaving because of poor performance they may not have any leverage, but if the employee has a potential legal claim, such as a claim for workplace discrimination or any other type of wrongful termination, this may provide the employee with some leverage,” says Lori Rassas, employment attorney and author of The Perpetual Paycheck: 5 Secrets to Getting a Job, Keeping a Job, and Earning Income for Life in the Loyalty-Free Workplace. “In these types of situations, an employer may be likely to offer an employee with a severance package in exchange for the signing of a release agreement, which means the employee would agree not to file a lawsuit [against] the company related to their departure in exchange for a financial payment or other valuable services.”
Other factors that affect your ability to negotiate include “the company’s history for providing severance, your value historically to the company and any meaningful relationships you may have established with key influencers… and your level in the food chain,” says Roy Cohen, career coach and author of The Wall Street Professional’s Survival Guide. And “if you’re particularly good at what you do, your company might consider a better package if you agree not to open your own small business in the same field and locale, as one brief example… There’s also the guilt factor, as many employers feel bad about letting folks go, especially those who have been with them for the long-term,” says David Bakke, Writer/Contributor at Money Crashers.
Once you have a good idea of what type of and how much leverage you have, you can use that to formulate your argument for why you deserve a great severance package and what the terms of it should be.
“Always have a reason or several for why you are requesting that the severance be modified. Just because you want more, or something different, is never enough… Make sure you think through what you really want and deserve and what you are willing to give up,” Cohen says.
2. Have a Target in Mind
Just as in salary negotiations, it helps to have a specific range of what you’d like to receive in mind. But don’t just throw out a random number — if you do, you could either accidentally lowball yourself or, on the flipside, turn your employer off of the idea of negotiating altogether because of an unreasonably high request. So when determining a target range, make sure to do your research, starting first with the employee handbook.
“Many companies have severance policies in their company handbooks which establish a formula that provides a certain number of weeks’ salary for each year of service completed by the impacted employee. For example, an employer may have a policy that provides employees two weeks’ notice of a layoff… along with a severance payment in the amount of two weeks of pay for each year of completed service,” Rassas says. “If [such a policy] does exist and the employee has some leverage, they should view the policy as the floor for the negotiation and be sure to propose a financial payment that is in excess of what they might already be entitled to.”
It’s also worth reviewing your offer letter to double check and see if it included a stipulation on severance (often the case for senior executives) or doing some online research to see what those in similar situations have managed to secure.
Having a tough time coming up with anything at all? “As a general rule of thumb, two to four weeks of severance per year of service is a good benchmark to go by,” Bakke says, although this can depend on your level of seniority and income bracket. “As someone who sees about ten severance agreements every week, I can say that I generally see about one week per year for lower wage earners, two weeks per year for various managers and executives, and more generous packages for high-level executives,” says Granovsky.
Keep in mind, though, that “the total number of weeks or months is usually capped depending on the company’s generosity and its ability to actually pay. Cash-strapped companies, no matter how kind they may be, simply don’t have the financial wherewithal to offer rich packages,” Cohen cautions.
3. Think Beyond the Paycheck
Make no mistake: If you’re only thinking about your severance package in terms of dollars and cents, you’re missing out.
“Think both immediate and longer term. This is a divorce and your goal is to maximize your take-out. Items could include: More money, your bonus, the ability to exercise stock options or to receive deferred compensation, paid COBRA, access to your voicemail, payment for educational benefits if you are part way through a program, agreed upon references, your laptop, continued payment of a company auto lease. The list goes on,” Cohen says. “I always encourage my clients to be bold and to ask for whatever they can get.”
One tip Cohen has for maximizing your success is starting with the big requests first. “If you start out with the easy stuff, like references which cost the company zero dollars, then it will feel like a huge burden by the time you get to a request for a larger payout. They will think that they have already bent over backwards to accommodate you when, in fact, you have just shortchanged yourself by avoiding the more challenging negotiation,” he says.
And if an employer offers you an item in your severance package that’s not up your alley, don’t just take it — you can use it as leverage for something you do want, Rassas says. “For example, I worked with a departing employee who was negotiating a severance package from one job and who already had another job lined up. When the employer offered him a financial payment along career placement assistance in the form of a career advisor, the employee declined the additional assistance,” Rassas shares. “A better strategy would have been to ask for the full (or even partial) monetary value of the additional assistance, suggesting that he would be more comfortable using the funds for the precise type of assistance that best suits his needs.”
4. Consider Consulting a Professional
While it’s important to advocate for yourself during severance package negotiations, that doesn’t mean you have to go it alone. In particularly hairy or complex situations, reaching out to an expert may be your best bet.
“When you have a complex negotiation make sure to consult an expert, either an employment attorney or a career coach who has a lot of experience helping clients negotiate both severance and job offers,” Cohen advises.
Even if you aren’t dealing with a potential lawsuit on your hands, reaching out to an experienced professional can help you think strategically, explore which types of benefits are available, and help you make the most persuasive case possible.
“Remember, if an employee negotiates a severance package with someone in their company’s HR Department, it is likely that the representative has negotiated other severance packages and/or has some training about how to manage those types of issues. An employee will likely be at a disadvantage if s/he is negotiating a package for the first time,” Rassas says.