How to Get a Better Severance Package
If you got a pink slip and you're over 40, you may have more leverage than you think to negotiate severance. Here are some pointers on how to haggle for a sweeter deal.
No question about it, getting a pink slip is a shock. In the first few minutes, or hours, after being informed that the company no longer requires your services, a natural reaction (alas) is to sign whatever you're asked to sign and take whatever severance package your employer holds out to you. But don't be so quick to accept the offer. If you're a seasoned middle or senior manager over 40, chances are you can do better. First of all, know that federal law gives you time to think it over: You're entitled to take 21 days before you sign anything and, even after you've signed, you have seven days to change your mind.
Second, make good use of that grace period; start by looking up what your company's employee manual says about severance policy -- but keep in mind that it may be seriously out of date. Executive coaches say that most employee handbooks were written back in the days when many people stayed with one company for decades, so that the widespread policy of one week's severance pay for each year of service made some sense. But these days? Let's say you were hired four years ago. Unless you don't mind walking away with just one month's pay, get ready to negotiate.
Often, getting a better deal bears a weird resemblance to asking for a raise. If the company offers you a skimpy amount of money, and defends it by saying, "Well, this is what everyone else who's laid off is getting," you need to fire back with a thorough account of what sets you apart from the crowd. The more you can quantify your accomplishments and your contribution to sales and profits, the stronger your argument will be for a more substantial severance package.
Since you'll be leaving anyway, you may wonder why the company would be willing to haggle with you. According to Paul Tobias, an employment attorney who founded a nonprofit San Francisco-based research and advocacy group called Workplace Fairness (www.workplacefairness.org), formerly the National Employee Rights Institute, you are selling three things here: your John Hancock on a release that says you won't sue the company, which most companies these days want you to sign; a so-called nondisparagement promise, either implicit or explicit, meaning you won't foul the recruiting waters by badmouthing the company to outsiders; and a guarantee that you'll go quietly, without damaging morale among remaining employees (or customers).
Apart from straight dollars and cents, here are some items in your severance package that may be negotiable:
A short-term "stay-on bonus." Are you in the middle of a critical project for the company? Would management prefer that you not just drop it? Great! Ask for an enticement to stay until it's finished. Bill Hollett, a recently-retired outplacement specialist at DBM (www.dbm.com), worked on one bank merger where senior techies got a bonus of 75% of their salaries to stick around through the 10-month transition -- plus full severance pay at the end.
Outplacement. Over two-thirds of U.S. employers provide outplacement services, usually in a standard package that includes temporary office space and career counseling, typically in a group workshop. If you have a home office, consider trading the temporary desk and phone line at work for one-on-one coaching.
Medical insurance. By law, the company must offer you COBRA coverage, meaning that you pay a premium for health coverage that is much lower than what you'd have to ante up on your own. But COBRA lasts for only 18 months. If you believe your job hunt may take longer, bargain for an extension.
Unused-vacation pay. Especially if you work for a company that allows you to accrue vacation time from one year to the next, don't forget to calculate the value of all the fun you didn't have, in past years as well as the current one.
Bridging to retirement. What's your employer's policy on pension eligibility? Let's say it's "55 and ten" (age 55, minimum 10 years' of service). If you're vested and within five years of being eligible, you can ask to be bridged -- and don't be too quick to take "no" for an answer. "Some companies will hem and haw about this on the grounds that ERISA [the federal Employee Retirement Income Security Act] ties their hands, but it's not true," says Hollett. "And it doesn't cost the company much to bridge you, because you're already funded."
Stock options. You usually have 90 days after your termination date to exercise vested options before you lose them. If you push, though, most companies will agree to extend that period to as much as a year.
Noncompete agreements. This is a highly contentious area. If you're asked to sign one -- and be warned, it may be buried in an obscure paragraph of some other document, such as a waiver of the right to sue the company after you leave -- three words: Call a lawyer.
Next, see FORTUNE's 100 Best Companies to Work For.
Find the best employers in your state.
Got a question or comment? E-mail me here.