Career Advice

How to Negotiate a Severance Package After Being Laid Off

The job market is still solid, but the October Jobs Report from Hiring Lab indicates that problems may be brewing as the unemployment rate increased to a still-low 3.7%. Stresses are more severe in some industries than others. Over 135,000 tech professionals lost their employment in 2022, according to layoffs. fyi. In addition, renting and leasing companies lost 8,000 jobs in October, according to the October Jobs Report, while the logistics and storage sectors lost 20,000 positions.

If your industry is at risk, you should be aware that many businesses may provide severance packages to workers who are forced to leave their jobs due to no fault of their own. You might have stress relief, financial security, and more time to look for your next professional opportunity if you negotiate your severance package successfully. What steps you may take to make the transition easier while you hunt for the job may interest you if your company has just let you go or you have heard of possible layoffs at your organization.

In this post, we define the severance package, discuss how to negotiate your severance package and address some of the most prevalent queries people have following a layoff.

What exactly is severance pay?

Organizations may offer severance packages as part of their benefits packages to workers who are let go. Employers typically provide severance packages to workers they wish to part ways with amicably. This could occur if a worker is fired as a result of organizational changes or financial constraints. Even though financial compensation is the norm for severance pay, it can also take the shape of other benefits. An example of a severance package would be:

  • Extended insurance benefits or healthcare coverage
  • Assistance with finding a new job
  • The reimbursement of unused vacation time
  • Benefits from the company, like computers or other tools

Severance pay is often calculated by companies based on the length of service, but the method and sum are determined by the company’s regulations. The severance is typically paid in one single sum, however, it is possible to split it up into payments.

Some businesses might decide to bundle in extra perks like health insurance, vacation compensation, or stock options with severance as part of the package. These benefits could be taxable, albeit it varies depending on the recipient and the kind of benefit.

What is the process of severance pay?

Although most severance payments are monetary and made in a single check or bulk sum, an employee’s overall severance package may also include other benefits. Some things that are frequently paid as severance include:

  • Paid short-term health insurance.
  • Compensation for unused vacation, holiday, or sick time
  • Continuation of disability income insurance or life insurance
  • Outplacement services that could include career counseling, help with drafting a CV, and support for job searching

When receiving severance benefits, you usually have to sign some kind of contract that may have important clauses requiring you to forfeit or give up some privileges, including agreeing not to sue the company or not to work for certain businesses in the future.

The company normally issues a written severance offer explaining the specifics of the severance payout when a worker is let go or dismissed. To be sure you comprehend the agreement and its provisions, it could be advantageous to seek legal counsel before studying the paperwork and signing.

How to bargain for a severance package after a layoff

The following advice will assist you in negotiating your severance package:

1. Consult with a member of the HR department at your workplace.

Typically, meeting with your employer or a human resources representative to talk about your termination serves as the initial step in the negotiation phase. In this meeting, your company might explain its decision to let you go. To increase the likelihood of exiting the organization on good terms, try to act professionally throughout this meeting. To reflect on them afterward and find chances to discuss your severance package, you can decide to take notes during the conversation.

If your company gives you a severance agreement at this point, express your gratitude and let them know you’ll read it well before signing. Employees typically have 21 days to decide whether they agree with the agreement’s provisions or not.

2. Speak with a lawyer who specializes in employment law.

Next, think about getting in touch with a lawyer who specializes in employment law to analyze your severance agreement or go over your alternatives for asking for a severance package. A qualified expert can give you insight into the particular employment regulations in the state you live in and help you understand the legalese that is used in numerous severance agreements. This might assist you in ensuring that, by your eligibility, you obtain the highest possible amount of severance package and benefits. You can query your lawyer about the following issues:

  • Are there any state statutes that outline the deadline by which my employer must make the last severance payment?
  • Are there any state statutes that outline the amount of compensation I may receive?
  • What other sorts of severance pay, outside monetary compensation, may I bargain for in my position?

At this stage, you can also get in touch with a nearby employment agency to get a rough idea of how long it might take to get a new position with comparable pay and a degree of seniority. This might assist you in determining the amount of pay you require to move into a new work while still meeting your financial obligations.

3. Create a list of conditions you can bargain for.

After carefully reading your severance agreement and getting advice from experts, establish a list of the terms you think you can effectively negotiate. You may concentrate on the following areas:

  • Severance compensation: While most employers give workers up to two weeks of compensation for each year of employment, you could ask for up to four weeks of money if you can demonstrate that being let go would put you through a lot of financial difficulties. If you had a managerial or executive role with the organization, you might decide to bargain for an increased severance package.
  • Benefits and insurance coverage: Although the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows workers to keep their health insurance coverage, doing so can be expensive because it requires the worker to pay both their payment and the employer’s share as well. Asking your company to extend your health insurance and other perks, like life and disability coverage, for a few weeks or until you get a new job, is something you might want to think about doing.
  • Vacation period: Make sure your severance payout pays for any unused paid time off (PTO) you may have accrued. Although many firms compensate workers for unused vacation days by default and certain states mandate it, this is a crucial detail to confirm when bargaining your severance package.
  • Job support: For workers they fire, some firms offer employment assistance or relocation services. Additional job-related training, counseling, and office help are a few examples of this.
  • Stocks, pension schemes, and retirement savings: Prepare questions to ask your company about what will happen to your retirement funds, pension, and stocks when you leave. If your business has developed any regulations, make sure they deliver them to you so you can evaluate them before finalizing your severance agreement. Your state might have special laws governing this depending on where you live.
  • Additional payment: Finally, think about any additional remuneration you might accept from the company in the form of benefits. Continuing to use your corporate laptop, workplace gym membership, or receiving discounts on company goods and services are just a few examples.

4. Inform your employer of your situation

Set up a follow-up appointment to discuss your severance agreement’s conditions with your company or HR representative. By outlining your main talking topics in writing, you may become ready in advance. This might assist you in maintaining concentration and ensuring that you cover all the crucial information during your meeting. To make sure you comprehend the next procedures associated with your transition out of the organization, you might want to ask a few more inquiries in addition to discussing the conditions of your agreement. During this meeting, you might wish to ask your boss the following questions:

  • When should I anticipate getting my last paycheck?
  • Will my severance package be paid in one big sum or over time?
  • What is the deadline for exercising my stock options?
  • Can I cite you as a reference on future employment applications?
  • Can I obtain a copy of my performance evaluations?

5. Choose whether or not to accept the severance agreement.

Finally, consider if it makes sense for you to sign the severance agreement given your circumstances. There are several reasons you can decide not to sign the agreement, but many workers do so to aid with their money and reduce stress when trying to find new employment. For instance, if you take the severance package from your employer, they may require you to promise not to be employed by any of their rivals for a predetermined amount of time. You might decide not to consent to the agreement in this situation if you want to keep being employed in the same sector of the economy.

Employees may also decide not to agree to a severance agreement if they believe their employer terminated them unfairly. Contact a lawyer to go over your alternatives if you have cause to think that your employer’s activities are illegal.

Advice for negotiating a severance package

Below are some extra suggestions to assist you in successfully negotiating your severance pay:

  • Behave professionally at all times. Try to maintain composure when speaking with your boss, HR personnel, and coworkers. By doing this, you can effectively negotiate your severance pay and guarantee that you part ways with the business amicably.
  • Take every opportunity to gather knowledge. Take the time to gather documentation on your previous jobs and present pay, in addition to thoroughly reading the severance agreement and getting legal counsel. Use this data to demonstrate the value you offer to the business.
  • Write down everything. Take thorough notes throughout each of your sessions to ensure that you record every step of the negotiation process. Request a revised copy of the severance agreement as quickly as you can if your employer agrees to your terms.

Is Severance payment subject to tax?

The amount of tax you pay on severance pay varies depending on how much you get. The total amount that you receive might not be sufficient to cover your expenses while you look for another work, so you might want to think about negotiating a greater sum. Companies might withdraw a severance offer since they are under no legal duty.

When do businesses give out severance pay?

If a company is downsizing, restructuring its personnel, or going through business changes like acquisitions or mergers that result in job loss, it usually provides severance pay. Employees may also be eligible for severance after retirement or if they mutually decide to leave the organization.

The decision to offer severance and who gets it is left up to the business. For instance, if a corporation is laying off workers due to changes in organizational structure, not every employee will be given severance compensation by default.

Severance pay may also be given to specific employees in the event of an abrupt termination. Employees fired due to subpar performance or via disciplinary measures are often not eligible for it. Companies frequently choose to provide severance pay to a worker for the following reasons:

  • Defending itself from any legal action brought by a former worker for unfair hiring, unjust termination, or unpaid compensation.
  • Ensuring that the severance pay obligations outlined in an employee’s contract are met
  • Expressing gratitude for the worker’s years of service
  • Including a non-disparagement clause in the employment contract that forbids the employee from speaking negatively about the employer or its leaders in writing or verbally
  • Deciding to pay an employee severance based on goodwill

Are businesses required by law to provide severance pay?

The Fair Labor Standards Act (FLSA) states that employees are not legally entitled to severance pay from their company unless it is included in their contract or employee handbook except the business orally agrees to provide it.

The Worker Adjustment and Retraining Notification (WARN) Act is an exception to this rule, requiring employers to provide workers with at least 60 days’ notice before mass layoffs or factory closures. For further information on your eligibility for severance pay, consult your state and federal labor regulations.

Pay for severance and unemployment

Individuals who lose their jobs due to no fault of their own can profit greatly from unemployment benefits. The capacity of an individual to apply for unemployment compensation may be impacted by receiving severance money. The following are some reasons why receiving a severance compensation package may affect eligibility for unemployment benefits, even if eligibility requirements for these perks differ by state:

  • An employee certifies in writing that they left of their own volition.
  • A worker ends their formal employment by using accumulated paid vacation time.
  • An employee’s right to receive unemployment benefits is terminated by a signed release.
  • Instead of paying severance in one single sum, an organization pays monthly payments.

If an employee is terminated or laid off without good reason, or if they are otherwise involuntarily separated from their job, they may be eligible to receive unemployment compensation. Even while receiving severance may postpone eligibility for unemployment benefits, it may still be possible to do so.

According to their severance and layoff agreements, a worker may still claim unemployment benefits even if they are paid severance for three months and are unable to secure employment before it expires.

How businesses determine severance pay

The compensation a firm offers its employees is determined by their field and the position of the dismissed employee. There is no industry standard for severance pay, therefore it is up to each employer to choose how much to offer.

The length of time an employee has worked for the business, the size of the organization, and the position and rank of the employee are sometimes taken into account when calculating severance pay. Before paying you, the employer often deducts taxes and subtracts one to four weeks of your compensation, multiplied by the number of years you have worked there.

Here is a sample of how severance pay is calculated:

Over her ten years with Bunks Marketing, Jessica made $2,000 weekly. For each year of service, the corporation devised a severance plan that paid laid-off workers three weeks’ worth of wages. Jessica made $4,000 over three weeks at her weekly wage. To account for her ten years of work, Jessica got a severance payment of $40,000.


In conclusion, navigating the process of negotiating a severance package after being laid off can be a challenging and emotional experience. However, by understanding your rights, gathering relevant information, and approaching the negotiation with a clear strategy, you can advocate for a fair and favorable agreement. Remember to remain professional, maintain open communication, and consider seeking legal or professional advice if needed. While the outcome of the negotiation may vary, being well-prepared and assertive can increase your chances of reaching a mutually beneficial agreement that provides financial security and eases the transition into your next career opportunity.

Frequently Asked Questions Regarding Severance Package for Layoffs

After being fired, it’s common to have concerns regarding the severance package. To assist you in this procedure, the following are responses to a few of the most typical questions:

  • Who is qualified for severance pay?

While some firms may provide severance compensation as a gesture of goodwill to workers, your eligibility for it may depend on whether you and your employer executed a severance agreement when you were employed. Additionally, if an employee was fired due to conduct or performance difficulties, employers may withdraw severance pay.

However, there is some further protection provided under the Worker Adjustment and Training Notification Act. A business with more than 100 employees is required to provide a severance package if widespread layoffs are implemented without a minimum of 60 days’ notice. This frequently happens when a business closes a whole office or unit without giving customers enough warning.

  • How much severance compensation am I eligible to get?

Depending on the sector that they operate in, the nature of their position, and how long they have been employed by the organization, employees may get different amounts of severance pay. Examine the terms of any severance agreements you may have already signed with your company to find out how much money you might be entitled to based on your qualifications. Your company could determine your severance package on the number of years you worked for them if you don’t have a formal severance agreement.

For each year of employment, employees typically earn between one and two weeks of their regular pay. For instance, if you’ve been employed by the same employer for five years and make $1,000 a week on average, you might be entitled to $5,000 to $10,000 in severance pay.

  • Does my severance pay have to be taxed?

You might anticipate paying taxes on your severance pay at the close of the year if you get it in a lump amount. Similarly to this, you have to keep paying taxes on the sum of your severance pay yearly if you get it in installments over an extended amount of time.

Make sure you have enough money set aside from your severance pay to pay your taxes by anticipating how much you will owe depending on your annual income. While you search for new employment, making a weekly or monthly spending plan might also help you manage your severance compensation.

  • If I take severance compensation, can I still obtain unemployment benefits?

Even if you were fired by your company without fault of your own, you may still be eligible for temporary unemployment benefits. To start receiving unemployment benefits, you might have to hold off until you’ve collected all of your severance payouts. For information on your eligibility and the best time to apply, check the unemployment laws in your state. This can guarantee that you get your first unemployment check as quickly as possible and offer substantial financial support as you seek your future job.

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