Shakespeare wrote that "Parting is such sweet sorrow." But it can certainly be more sorrowful than sweet if you are let go or resign from a company without reasonable recompense. In some cases, you might be offered a severance package, which can include various benefits and pay that's separate from your final paycheck.
U.S. labor laws don't typically obligate employers to pay severance, and you shouldn't expect it if you're being terminated for cause or are a low-level and at-will employee. Many companies, however, offer compensation, and you may even be able to negotiate what's included. Here are tips from experts on how to get the most out of a severance deal.
1. Read the fine print before signing anything. Sara Austin, an attorney in York, PA., whose practice concentrates on employment law, says that workers in legally protected categories, such as those age 40 or older or people with disabilities, might be offered a severance package in exchange for signing an agreement waiving all legal claims. Before you sign such an agreement, she suggests you carefully comb through the fine print. In addition to describing pay and benefits, it might include a non-compete clause that limits your ability to take a new job.
2. Don't be afraid to negotiate. "Negotiating a severance package the right way can be critical for your future financial health," says Angela Copeland, a Memphis, Tenn.–based career coach and author of Breaking the Rules & Getting the Job. She recommends first taking the agreement home and thinking it over. You usually have a 21-day period in which to review, accept and sign it, or 45 days if you're part of a group termination.
Roberta Matuson, president of Matuson Consulting in Brookline, Mass., suggests asking for more than you think you will get. "The worst that can happen is that your employer says no, but most likely they will say yes or meet you in the middle," says Matuson. Depending on the company's written policy or jurisdiction, some severance packages may not be negotiable.
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3. Take a look at your original employment contract, too. If you have an employment contract, then you'll want to review it, along with any official severance policy that your employer has. That way, you can make sure you're getting what you're entitled to. In addition, it's a good idea to check with your state Department of Labor to determine if and when you qualify for severance. The Employee Benefits Security Administration may also be able to help if your employment contract requires severance pay but you didn't receive any.
4. Get legal help to review all of the documents. "This investment is completely worth it," Copeland says. A lawyer can help you understand the details of your agreement, advise you if something is missing, adjust any of the language and determine if it's appropriate to give up your right to sue the company over issues like discrimination or wrongful termination, she explains.
5. Consider asking for benefits beyond money. According to a Right Management survey of senior leaders and HR professionals in the Americas published in late 2016, severance packages often include outplacement services (offered to between 52 and 60 percent of employees, depending on job type), health-related benefits (50 to 61 percent) and monetary benefits (19 to 32 percent). The survey reveals that today's employees earn between approximately two and three weeks of severance pay, on average, for every year of service; however, 60 percent of employers provide outplacement aid in lieu of monetary payment.
"At minimum, a severance package can include pay for a specified amount, often determined as a function of weekly or monthly pay and tenure," says Dorris Hollingsworth, president of Evergreen HR Group in Atlanta. "Other items could include forgiveness of company loans or tuition and compensation to cover health insurance costs for a period of time."
6. Think about the details. You may want to ask that your severance be paid out over time, instead of in a lump sum, to make it easier to manage your cash flow and regular expenses. Another option to help cover health-related costs is to ask to remain on the company health plan as an employee or to ask the company to pay COBRA costs directly. Requesting to keep your company phone or laptop for personal use after it is reset and asking to convert your life and disability insurance to an individual policy are also options to consider.
In addition, check that you will be compensated for any unused vacation time, accrued sick leave, bonus and commission payouts, and reimbursable expenses you paid out of pocket. (These items may be included in your final paycheck separate from your severance agreement.) Your employee vested/accrued interests in pension, profit-sharing and 401(k) plans and stocks should be accounted for, too. And if you manage to come out of the severance process with your working relationships still intact, then you might want to inquire about working for the company as an independent contractor in the future.