As the job market grows more volatile, mastering the art of handling layoffs and approaching severance negotiations becomes an invaluable ability. A recent survey by JustAnswer revealed that “58% of individuals who were offered a severance package during layoffs did not engage in negotiations for that package.” Despite this substantial figure, negotiating severance is far from futile.
Sho Dewan, a career coach and the founder and CEO of Workhap, along with Merry A. Kogut, a licensed attorney practicing in Washington, provide insights into the negotiation process, dispelling myths and sharing vital guidance to empower employees as they prepare for their severance discussions.
What is severance pay and when should it be provided?
“Severance pay,” Kogut clarifies, “refers to the financial compensation that an employer may offer an employee when they are terminated from their position. While some employment contracts require it, many employers do not provide it for ‘at will’ employees at termination—these employees often need to request it and negotiate its provision.”
So, who qualifies for severance? Kogut points out that employees are only “entitled” to severance if it is specified in their employment contract, policy handbook, or company guidelines. Most individuals who are laid off are considered “at will” employees, meaning they can be terminated without cause. Without specific legal protections or contractual agreements, they don’t have an automatic right to severance.
The advantages of negotiating severance
If you have a right to severance, Dewan notes that many employees make the biggest error by not negotiating the terms at all. “They accept the initial offer without question, thinking that’s all they can achieve,” he states, stressing that employees are encouraged to ask for better terms.
Many people mistakenly believe that severance packages are non-negotiable. In reality, they can be adjusted based on discussion.
Several elements can affect the severance pay you might obtain. Some of the factors mentioned by Kogut include job title, duration of employment, salary, existing employment agreements, or company policies, as well as the grounds for termination. Utilize these considerations, and remind your employer of your accomplishments, commitment, and loyalty during negotiations.
Upon receiving an offer, Kogut highlights the necessity of refraining from signing the severance agreement right away, suggesting that employees take the time to evaluate the offer and consider seeking advice from a legal professional well-versed in employment matters.
Dewan concurs. “Avoid signing anything right off the bat. Give yourself time to think it through; manage your emotions,” he advises. He encourages employees to gather their thoughts and approach severance negotiations with a level-headed mindset.
Get ready for severance negotiations
Effective negotiations hinge on thorough preparation. Although receiving a layoff notice can be surprising, leaving many feeling emotionally drained and suddenly without income, it’s crucial to prepare. Once you feel ready, create a list of points you would like to negotiate. Go through the terms in your employment contract or the employer’s policies, and be prepared to highlight your contributions and successes.
According to Kogut, employees should “compile a written list of topics they want to address in the meeting.” It’s best to prioritize and condense the list to keep discussions focused on the most critical matters.
Finances aren’t the only elements that can be negotiated in a severance package. You have the ability to negotiate various aspects of your severance. Some examples Dewan provides include additional severance pay, compensation for unused vacation days, career coaching, and an extension of health benefits and insurance coverage. Kogut adds that references, unemployment benefits, retirement benefits, and an agreeable final workday are also negotiable items.
Once your list is prepared, it’s time to engage with HR. During your meeting, begin by listening to their initial offer and evaluating whether it seems reasonable. Not everything needs to be contested, according to Dewan.
“If you find the offer fair and acceptable, it’s completely fine to go ahead and accept it,” he indicates. “However, it’s useful for you to be aware of the various aspects that you desire.”
Key considerations in negotiating severance
When negotiating with HR, Kogut advises employees to proceed cautiously in two specific areas.
Firstly, employers might ask employees to sign a release to absolve the employer from all liability, which could prevent the employee from initiating legal action against the employer. Additionally, severance agreements may include a noncompete clause which might restrict future job opportunities. Both of these elements should be scrutinized with legal counsel before any agreement is finalized.
A message for employers
For business owners and employers, managing layoffs and severance negotiations can be a delicate challenge. Dewan’s counsel is to consider the lasting impact you can have on departing employees. “Keep in mind that how an employee leaves your organization often shapes their recollection of it,” he emphasizes, highlighting the necessity of ensuring that the experience feels neutral (or even positive), as employees may remember it for years to come.
“Exercise some empathy,” he suggests, recognizing that layoffs are frequently unforeseen and can lead to significant financial repercussions for employees. Even if an employee negotiates certain terms, make a concerted effort to listen to their concerns and work towards a mutually satisfactory conclusion.
Handling layoffs effectively
Dewan encourages those affected by layoffs or involved in severance negotiations to avoid taking the situation personally. “More often than not, your selection for layoffs is not a reflection of you or your performance. It is usually just about organizational fit,” he states.
The crucial point is to have faith in your skills and capabilities, knowing that better opportunities are on the horizon. “Strive to maintain a positive outlook and turn this into a win-win scenario,” he recommends.
Although navigating this process can be daunting, understanding your rights, recognizing what you can negotiate, and maintaining a clear mindset can significantly alter the results of your severance negotiations.
