Severance Package Negotiation:
7 Steps & 5 Tips

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What Is A Good Severance Package

While being released from employment creates feelings of stress and uncertainty, it is possible to go through a severance package negotiation to suit your financial needs better while seeking employment elsewhere.

Negotiating more severance pay can far outweigh the associated risks. However, it is best to review the severance agreement and employee handbook with employment lawyers in your state when negotiating your severance package.

What is a Severance Package?

A severance package, also known as severance pay, is a form of compensation that employers provide to employees upon resignation or termination, although they are reserved mainly for layoffs. While there is no standard or boilerplate definition of a severance package, it generally refers to these terms.

Severance packages typically include some type of payment along with a severance agreement. In exchange for a contract to not hold the company civilly liable, the employee receives either a lump sum or recurring compensation payment, including unused personal time off (PTO) and benefits.

What is Severance pay?

Severance pay is the total compensation package provided to the employee upon leaving the company. A severance agreement is a legally binding employment contract that ensures specific conditions and terms are met. Typically, the elements of a severance agreement include a release of claims, a confidentiality agreement , and a non-disparagement agreement.

Understanding The Key Elements Of A Severance Package

Severance packages are negotiated before the employee is even hired. These agreements can differ by industry or geographic location or dependent upon the types of employment contracts in place.

There are specific legal elements that all severance packages should have, which means that reviewing them beforehand will help employers and employees familiarize themselves with the process.

The key elements of a severance package include:

  • Compensation that the employee receives, including payments, insurance, unused PTO, stock options, bonuses, and other benefits
  • Noncompete agreements that stipulate whether you can engage in competitive activities upon departure (not legal in all states)
  • Non-solicitation agreements that prevent the employee from recruiting former colleagues as employees (not legal in all states)
  • Non-disparagement agreements to ensure that the employee does not make negative remarks about the company in the future
  • General release of liability will prevent employees from holding the company liable against future legal claims include litigation and more
  • Confidentiality agreements(LINK) require employees to keep internal company information and trade secrets private after leaving the job
  • Dispute resolution clauses describe how you handle legal issues through arbitration rather than litigation (not legal in all states)

When you draft a severance agreement, hire licensed employment lawyers in your state rather than leave things to chance. For instance, if you are executing and signing the contract under California laws, choose California employment lawyers to review your situation's particulars.

Steps To Negotiate A Severance Package

While your employer may be downsizing, it can be an overwhelming prospect to negotiate a severance package. However, it is vital to recognize that this practice is common across several industries and companies. The key is knowing that all contracts are up for negotiation.

While your employer may be downsizing, it can be an overwhelming prospect to negotiate a severance package. However, it is vital to recognize that this practice is common across several industries and companies. The key is knowing that all contracts are up for negotiation.

When negotiating a severance package , consider the following steps:

STEP 1

Formulate a plan of action and reserve specific facts, such as how long you have been with the company, the amount of value you created, and how much time it will take you to acquire new employment

STEP 2

Review the employee handbook and employment contracts to understand company policies related to severance agreements.

STEP 3

From this information, come up with a proposal that reasonably describes why you are asking for more money or more extended periods of benefits.


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STEP 4

Have a meeting with your employer to propose the new terms and bring any employment contracts in place with you.

STEP 5

If your employer objects to your request, note the reasons as to why since they may become relevant later while counteroffering if they have valid points.

STEP 6

Speak with employment lawyers if you believe you deserve more or other disputes arise.

STEP 7

Execute a severance agreement in writing that explicitly details the terms and conditions of your severance agreement.

Another negotiation tactic that at-will employees use is to appeal to the company's best available severance package. By focusing on the value you produced for the organization, your chances are to secure additional compensation. Get legal advice from employment lawyers if you need legal advice or specialized help.

Severance Package Negotiation Discussion

Image via Pexels by Andrea Piacquadio

Basic Tips When Negotiating A Severance Package

The art of negotiation can take several years to perfect and is a sought after skill to possess. While employment lawyers have years of experience in this area, you can also learn more about how certain parts of severance packages are negotiated through self-education and study.

Tip 1: Survey Your Coworkers

When a merger or change in management occurs, it is not unusual for companies to lay off numerous employees at once. Instead of trusting that you are getting a good deal, take the time to compare your severance package with former employees, if possible, to establish its fairness.

Tip 2: Discuss What-If Scenarios

Upon leaving your job, it is possible that several things can change. Determine if your benefits will be paid out if you become disabled or lose your life. Ensure that your package will be paid even if you end up securing employment elsewhere before payment in full occurs.

Tip 3: Take the Lump Sum

If you cannot negotiate an increase in severance pay, ask your employer if they are willing to agree to a lump sum payment. While most employers offer payments over time, they may see the benefit of employment contracts that include a lump sum payment provision. A lump-sum payment for you ensures that you have money in hand.

Tip 4: Plan for Taxes

Since severance packages are taxable, be sure to set aside a percentage of your pay for taxes. Many companies will withhold payroll taxes from employee wages, which means you will need to adjust your household budget. Consider using the taxability of your income as a negotiation point to increase the amount you could receive.

Tip 5: Clarify Confusing Legal Jargon

When it comes to legal drafting , concise and straightforward language is best. However, this experience is not uniform in practice. Employees may have a challenging time deciphering confusing legal jargon when reviewing a severance package.

Speak with severance agreement lawyers to help you clarify what is being presented so that you fully understand your rights and limitations. Your attorney will also help you identify points of renegotiation where applicable.

Hiring A Lawyer To Help Negotiate A Your Severance Package

Employment lawyers are masterful contract negotiators. Not only do they have a rock solid command of the applicable laws, but they also have developed their communication skills to help clients with contract matters. They can also point out potential violations and other opportunities for a legal remedy for their clients.

If they find any civil violations, they can also help you handle litigation matters that hold unsavory employers accountable for their actions. The law protects your civil right to be treated fairly when entering into and negotiating a contract .

Ensure that your severance package is lawful and delivers on its intended purpose. Post your project with ContractsCounsel today at no upfront cost to learn about your legal options from employment lawyers.

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