Negotiating Strategies to Maximize Post-Termination Severance

There is no law requiring employers to pay severance unless they have done so in the past, if promises were made in a company handbook or manual, or if your contract has a clause requiring the company to pay a specified amount of severance. Stay calm when the boss calls you in and informs you of the termination. It is best to say as little as possible initially. Write down everything the company offers you. After receiving an initial offer, tell the employer you need time to think it over. Ask for the employer to confirm the proposed terms in writing. Avoid accepting the company's first offer if you can help it. Try to stay on the payroll while negotiations ensue. Stalling for time can help you learn important facts, including what other similarly situated terminated employees received in severance. Most importantly, your goal is to continue receiving regular wages as long as possible while negotiations are proceeding (before the severance package "kicks in"). If you are a salaried employee who works on a full-time basis, you have everything to win if you negotiate forcefully but quietly; thus, request another negotiating session to obtain more benefits.

Tip: Employers sometimes violate discrimination laws by paying different severance packages to terminated workers. When they fail to act consistently, they commit illegal acts. For example, say you are fired suddenly due to a business reorganization and had worked at the company for four years. You are initially offered eight weeks' severance pay but learn that a male employee in your department who was fired last year after working one year was given one month's severance. This could constitute sex discrimination if you are not paid four months' severance pay (the same pro rata rate) unless the company's policy is to pay terminated employees a minimum of four weeks' severance no matter how long they worked for the company. Remember this and act accordingly.

The golden rule is to never quit. Refuse an employer's offer to resign whenever possible. This is because if you resign you may be waiving a claim to unemployment and other severance benefits, including earned commissions. This is a trap many employees fall into.

Important Negotiating Points

The following strategies can help you obtain a better severance package, whatever your situation, often without a lawyer's assistance.

Wages (also referred to as salary continuation)

1. Try to stay on the payroll as long as possible.

2. Negotiate for the employer to continue to provide medical, dental, and hospitalization coverage (paid for by the employer) while you are receiving severance wages.

3. Avoid arrangements where you are offered severance for a specified period of time (e.g., six months) which automatically ceases when you obtain a new job. Rather, make the offer noncontingent on new employment. If that is not possible, arrange that differential severance will be paid in a lump sum if you obtain a new job prior to the expiration of the severance period. (For example, request that three months' worth of severance will be paid in a lump sum if a new job is obtained any time before the six months' of salary continuation expires.)

4. If severance pay is to be paid in a lump sum, consider asking for it immediately, not in installments over time.

5. Consider the tax ramifications of postponing a lump sum payout until the following year, when your tax base will be lower if you do not find employment quickly.

6. Recognize that if you receive salary continuation rather than a lump sum payment you may be ineligible for unemployment benefits until the salary continuation payments cease in some states; thus, always contact your local Department of Labor for guidance and consider the benefits of a lump sum payment rather than extended salary continuation (unless you are not adversely affected under your state's unemployment compensation policies).

7. Avoid accepting the employer's first offer; always negotiate, negotiate, negotiate.

8. Attempt to receive at least four weeks' severance for every year of employment.

Other Compensation

1. If you have relocated recently at the request of the employer, try to obtain additional relocation allowances.

2. Discuss accrued vacation pay, overtime, and unused sick pay. Be sure you are paid for these items.

3. If you were fired without notice, ask for two additional weeks of salary in lieu of the employer's lack of notice.

4. If commissions are due or about to become due, insist that you be paid immediately; do not waive these expected benefits.

Copyright 1998 Steven M. Sack