What to Do When You Have Been Offered a Severance Package


Posted almost 6 years ago. 12 helpful votes



Take Your Time

A severance package is pay and benefits that an employee is offered when they leave employment with a company. A severance package may include compensation or payments based on years of service, payment for unused vacation time or sick leave, insurance benefits, bonus payments, or stock options. There also may be an offer of outplacement services (i.e., assistance in finding a new job). Most severance agreements include time provisions allowing an employee time to consider the agreement. Take it. Time is critical. Time can allow you to analyze the offer, negotiate, or retain counsel to assist you. If you are over 40, the law requires employers to include in most standard severance agreements a minimum of 21 days to consider it.


Gather Information

You need to determine exactly what is being offered, what has been left out, and whether you have room to negotiate. Locate your original offer letter, employee handbook, e-mails, or other documentation of your salary and the company severance plan, if there is one. Gather all information on your bonus plans, stock option rights, life, health and disability insurance, and vacation time. Write down all the possible sources of compensation and benefits you currently have such as bonuses, commissions, stock options, or other payouts. Determine whether you have any unpaid vacation and sick time, reimbursable business expenses, or possession of company property such as cars, laptops, or PDAs.


Review the Package in Detail

Determine if the package leaves out sources of compensation, benefits, or insurance. Determine how it stacks up against other standard offers in the industry or for other similar employees.


Evaluate Why You Were Let Go

You may have grounds to claim wrongful termination or to negotiate a better severance package if you were fired or laid off for any of the following reasons: to deny accrued benefits; due to a legitimate illness, disability or absence; for voting or serving on jury duty; for whistle blowing or speaking out; for reasons against public policy; for union activities; for military duty; discrimination (e.g., sex, age, religion, or national origin); retaliation for workers' compensation claims or sexual harassment claims; violation of written or implied contract; or as part of a large layoff without proper notice. If you sign a severance agreement without negotiation, you likely will be giving these rights away forever.


Decide Whether to Negotiate

Many employers will negotiate severance on some level. In some situations, an employer may be able to revoke an offer of severance if you reject the offer. As such, there may be a risk associated with negotiating your severance agreement. However, in most circumstances severance is negotiable. Your chances of negotiating successfully may depend on any basis to claim that the severance package is not fair in light of your industry; employment salary, terms, and benefits; other similar employees with lower performance; or the circumstances of your termination. In the end, you will never know if your employer will negotiate and give a better offer if you do not ask.


Decide What to Negotiate

Although the dollar amounts may be your initial focus (including bonus, stock options, and company property), many severance packages can and do include many other aspects including extended insurance coverage, disability benefits, and outplacement services. You might also consider negotiating for letters of recommendation or a favorable statement regarding your "voluntary separation" rather than termination.


When in Doubt, Hire a Lawyer

In addition to the shock of being let go by your employer, you may be faced with significant financial distress. These factors can interfere with your ability to objectively assess your rights. You should consider hiring an attorney to review the severance package, help you decide if there is room to negotiate, or negotiate directly for you. Deciding whether to accept, reject, or negotiate a severance package can have significant financial implications.

Additional Resources

Severance Practices Benchmark Study

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