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Personal Finance
Negotiating for severance
March 8, 2001: 10:50 a.m. ET

You may have more room to negotiate than you think; coordinate a plan of attack
By Staff Writer Shelly K. Schwartz
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NEW YORK (CNNfn) - The higher-ups are locked in closed-door meetings. Morale is low. And whispers around the water cooler have reached a quiet crescendo.

Layoffs are imminent.

That same scenario is being played out in thousands of offices nationwide as corporate American tightens its belt. Some 372,000 workers entered the unemployment lines in the last full week of February alone, the Labor Department reports.

Experts are finding, however, that too many of those suddenly jobless workers fail to realize they may have room to negotiate when signing their severance packages.

"Companies generally present it as something that is hard and fast, so when they call you in to discuss it, it's really just to announce what their severance package will be," said Richard Bayer, chief operating officer for The Five O'Clock Club, a New York-based career counseling group. "The fact of the matter is, though, that you can enter into discussions. Companies do have incentives that they can offer so you have some cards to play."

Bayer notes all companies strive to treat their employees fairly when it comes to layoffs. After all, their reputation is at stake.

"They've got morale within the existing work force to think about, and they don't want to commit any grotesque injustices, because the good people left behind will wonder what happens if they're next and start looking elsewhere," he said.

There are also the stockholders to worry about. Companies that enrage outgoing employees can potentially create a crisis of confidence on Wall Street, as one-time workers fire back with rumors and legal action that can sink a stock price.

And lastly, Bayer said companies that do announce layoffs oftentimes still have to staff up in smaller departments. They've got to maintain a solid reputation as an employer in this already tight labor market.

Talking incentives

Severance packages are really just an allowance, financial and otherwise, given to employees upon their termination from the job. They are often based upon length of service and job title, and they generally consist of cash settlements, career counseling services, benefits, office space or other items.

John Challenger, chief executive of the Chicago-based Challenger Gray & Christmas outplacement firm, said the average corporate executive receives severance pay and benefits for 1-to-4 weeks for each year of service, with a minimum of 6 months to a year.

The standard package for middle managers consists of 1-to-2 weeks of severance pay for each year of service, with a minimum of 3-to-4 months. And the rest of the population, the rank and file workers, typically receive 1 week for each year they've been with the company with no defined minimum.

Challenger notes that negotiating for a better severance package can be less successful if you're part of a mass layoff in your office.

"In a downsizing situation there's usually not much room for negotiating," he said. "In those cases, the company has set its policies and it's very difficult for that to change because of the repercussions it might mean for the rest of the packages given out."

You'll have the best luck if you've been with the company for a long period of time -- 10 years or more and if there are outside circumstances.

For example, Challenger said, employees on the layoff list who were recruited from another state just a year or two earlier often can make a case for an extension of severance pay or at the least outplacement benefits.

Contrary to popular belief, corporate executives are human and most understand that these employees have left behind their network of friends, family and business associates.

"There's also more room when an individual poses some kind of litigation threat to the company over any of the protected kinds of situations like discrimination against age, gender or race," Challenger said. "That kind of potential exposure to litigation can sometimes be extra leverage for a person to bump up their package."

Bear in mind that companies are not legally obligated to provide severance packages at all, unless it's clearly stated in their employee contracts or policy.

The first move

Challenger said negotiations are best approached by seeking out the help of an ally involved in the process, at least initially. Save the big guns, or attorneys, for later.

"It's usually best when negotiating to start from a standpoint of need rather than playing hardball," he said. "See if you can't find someone to advocate for you."

First and foremost, The Five O'Clock Club said, you should push to continue your benefits. It costs companies very little to carry employees on its medical plan, but that same coverage out of your own pocket could be financially crippling. You don't want to suddenly find yourself without proper coverage.

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  "There's always a temptation to take the sweets and run but you want more than that; you want your career to remain on track."  
     
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  Richard Bayer, The Five O'Clock Club  
Next, step back from your situation long enough to consider it critically. Find out if you can what others at your office and in your field have received in severance benefits and coordinate an organized plan of attack.

You may not be able to secure more money, but some companies will allow you to swap the use of office space in exchange for one year of career counseling assistance.

That can come in handy if you try your hand at consulting and it doesn't work out, or you find a new job but quickly realize it's not for you. Traditional outplacement firms do not allow you to return once you've been "placed," the group notes.

And keep in mind, that a seemingly large cash settlement may quickly be eaten up if you end up paying for outplacement help and benefits on your own.

"There's always a temptation to take the sweets and run but you want more than that; you want your career to remain on track," Bayer, of The Five O'clock Club, said. "In order to do that, you've got to use some of that money prudently. Set some of it assign for outplacement help. It should pay great dividends."

The big guns

"It can't hurt to talk with an attorney if you feel your severance program is wanting, or if you feel you've been wronged," Challenger said. "That attorney can then address those issues with the company and act as your agent."

Many charge an upfront fee for their services. Straightforward cases can cost less than $1,000, but legal fees for complex cases involving allegations of sexual harassment or whistle blowing, for example, can get expensive.

To cut down on the threat of litigation, many companies these days toss in extra incentives for employees who agree to sign a waiver indicating they won't disparage the company publicly or retaliate with a lawsuit down the road.

Don't feel pressured. By law, many employees, especially those over 40 from whom their company is seeking the release of age discrimination claims, have 21 days to sign those documents and seven days after they sign it to revoke it. graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.