How to Negotiate a Severance Package During a Job Layoff

Severance packages vary.

A severance package during a job layoff may be the difference between financial survival for your family or failure. Unemployment is a constant threat for most workers. Your position of negotiating strength is better if you have important trade information and you are willing to sign a non-compete agreement.

Instructions

1. Negotiate your severance pay. Loss of pay will probably hit you the hardest during the layoff so try to maximize the severance pay you receive. Unless you live in Montana, you are probably employed at will. The only legal obligation your employer has to you is if you are in a union contract or you have a signed contract. Otherwise, there are no federal laws that mandate your company to provide you with severance pay.

   Even though they are not required, most companies will provide some type of severance pay typically based on years of service or other company policies. Typically the severance pay will be at least two weeks and may be as much as six months. On top of severance pay, your company should pay you for unused sick, personal, and vacation time, although sometimes there are formulas that reduce the payout.

   You will need to determine if a lump sum payment or weekly/bi-weekly payments will best suit your needs. Typically you will not be able to file for unemployment benefits until the severance period is over. A lump sum payment will allow you to file for unemployment benefits faster, however, if you request a lump sum payment and you are near the end of a tax year so can easily bump your earnings into a higher tax bracket.

2. Find out what your company is offering for health care coverage after the layoff.

   Some companies will continue your normal health care coverage through the severance period. Try to negotiate this coverage so your premiums are lowered as long as possible. If your company will not extent normal coverage through the severance period, it is required to provide you with coverage under the federal COBRA program.

   If your company has 20 or more employees and you are laid off, you have the right to continue group health care benefits for at least 18 months after your severance period. You will have to pay the entire premium including the company portion-- up to 102 percent of the cost.

3. Ask your employer if it will offer a continuation of life insurance. Life insurance coverage typically ends the day you are no longer employed. Try to get an extension so you will have time to find new life insurance to avoid a gap in coverage.

4. Check to see if some personal liability could follow you. If you have worked in an area that leaves some personal exposure, request written liability protection from lawsuits. You will be asking your company to provide legal services if there is a work-related claim against you.

5. Ask your company to put in writing in the severance details that it will not contest an unemployment benefits claim.

6. Get in writing that you will receive good recommendation. If you company will not agree because policy states that it will only provide verification of employment, then this requirement should be satisfied.

7. Ask that you become 100 percent vested in the 401(k) plan upon exit. This may be a tough sell, but depending on your negotiation of the remaining items it may be possible.

Tips & Warnings

• Ask your employer to provide the written details of your severance package. You should take the details to an employment law attorney to review.

References

• Glenn N. Solomon: The Montana Wongful Discharge ...
• The Washington Post: How to Negotiate a Severance Package