In times like these, you need to think the unthinkable. What if you lose your job? Your first order of business will be to get yourself the best severance package possible. Here are some pointers to help you accomplish that goal.
What Kind of Severance Can You Expect?
Some companies negotiate individual severance packages; others provide standard packages to all departing employees. Severance can be offered in either a lump sum or as a salary continuation and is generally based on position and length of service. For example, employees may get two weeks and vice presidents one month of severance for each year of service. “The old rule of thumb is that it took one month of search for each $10,000 in annual salary,” according to a San Francisco consultant. “Nowadays, it’s probably more like $15,000 to $20,000. For C-level executives, severance pay is often a multiple of salary and bonus (such as 1.5 times base + target bonus).”
Some companies also let employees keep their benefits, including not just COBRA coverage which is required by law but other benefits like outplacement services.
Negotiating Your Severance Package
If your compensation agreement doesn’t include a provision for severance and your organization doesn’t pay a standard package, you may be able to negotiate a severance package upon your exit. But you need to do some homework.
First, you need to know where your company stands on general severance issues. You also need to learn all you can about your dismissal. What’s the current state of the company’s finances? How many others were laid off? If you think you were fired wrongfully, you may need to consult a lawyer before entering severance negotiations.
Before formal meetings begin, write down your agenda, including:
- The problem: You’re being let go and don’t know what severance the company is willing to pay;
- Your baggage: You’re afraid of being left high and dry in an unstable job market; and
- Their baggage: They probably don’t want to shell out money and other benefits right now to employees who are leaving.
In deciding what to ask for, consultant Pat Schuler suggests revisiting the standard formula for determining the terms of a severance agreement. In other words, estimate one month in transition for each $10,000 in salary. Once you’ve done your homework, you can begin negotiation by talking severance with your boss.
Regardless of the formula, you will most likely receive some form of severance. For one thing, companies understand that severance sends an important message to current employees that the company is fair. Paying severance also helps companies reduce the risk of lawsuits since to receive the package, the employee must sign a release promising not to assert any claims against the company.
Wishing you career success