Bargaining for a better severance package

While packages vary widely by industry and employee, workers should know what to expect, and how to ask for more.

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By Jessica Dickler, staff writer

What should Congress do for U.S. automakers?
  • Lend them money
  • Do nothing
  • Lend them money but kick out current execs

NEW YORK ( -- As another wave of layoffs hits an economy in turmoil, many workers will depend on severance packages to stay afloat.

But what each worker will receive is largely unknown, because the offer will vary wildly.

According to human resources association WorldatWork, 31% of employers offer one week's salary per year of service, while 20% provide two weeks salary for every year served. But 47% of respondents had their own formula for determining severance, which could also factor in the economic climate, the industry and the individual.

Severance is dependent on each company and on that company's state of health, said Bob Eubank, executive director of the Northeast Human Resources Association.

Some employees in the financial services industry have not fared that badly.

Those that lost their jobs at Fidelity Investments this month will stay on the payroll until the end of the year and remain eligible for a year-end bonus. After that, each will receive a payout based on their salary and years of service. There is also ongoing outplacement service, which includes access to office space and career training, according to a spokesman from the mutual funds company.

But that's generous by some standards. Workers in other companies won't be so lucky.

After DHL announced that it was discontinuing operations within the U.S. and cutting 9,500 jobs, a spokeswoman from the delivery company said most employees would receive two weeks pay, plus an additional week for each year of service, as severance. In addition, employees will be offered outplacement services and reimbursement for any unused vacation time, the spokeswoman said.

Electronics retailer Circuit City (CCTYQ) said it intends to pay 60-days salary to field managers and associates who were laid off at the company's headquarters in Richmond, Va.

Former employees of shuttered stores have yet to learn their fate. "No decisions have been made about severance for the store associates who are affected by last week's announcement about store closures," said Jim Babb, a spokesman from the company.

Within each company, executives usually fare better than other employees when it comes to saying goodbye. Most companies have one plan for the CEO, one for key executives, and another for all other employees, according to WorldatWork.

And severance for higher ups is usually much more generous than the standard package - as in "multiplied by a very large number," says Joe Killmartin managing director of compensation planning for

For those making $100,000 or more a year, "a good, generous severance package is six months [pay]," said Paul Bernard, a veteran executive coach and career management adviser who runs his own firm.

But offers might come up short of expectations this year, as companies are increasingly restrained by the same economic factors that caused those layoffs in the first place.

"If companies find themselves in dire straits, then whatever plan they had for severance might go out the window," Killmartin warned.

When Lehman Brothers filed for bankruptcy protection in September, former employees of the brokerage firm lost their severance packages altogether.

On the chopping block

For those at risk of being laid off, there are a few things you can do to make the transition out of work a little easier.

For starters, educate yourself about your company's policy in advance. Usually there is a precedent that can give you an idea of what to expect.

That doesn't mean you are guaranteed anything, though, Killmartin said. "Companies have the right to change their policies," he said, and an economic slowdown might be the only reason your employer needs to do so.

Secondly, be prepared to negotiate. Although negotiating is harder now than in the past, it could be possible to get a few weeks, or even a few months, pay added to your package. Bernard advised consulting with an employment attorney before signing off on HR's first offer.

If your employer is facing bankruptcy, there may not be much they can do in terms of upping your payout, but they may be willing to cover the cost of your Cobra payments instead, Killmartin suggested. Companies are legally required to offer Cobra coverage, but employees are often stuck with the bill.

Even though employers are not generally willing to make a deal, they do have some incentive to do so. Employers don't want workers to leave feeling shafted. "That's sending a bad message" to the employees still on board, Killmartin said. "You don't want to demoralize the people you want to keep." To top of page

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