How To Negotiate A Better Severance Package
Many employees, including six-figure managers and executives complain that they feel powerless in negotiating with their employers. This is true whether the topic of negotiation is a raise, a promotion – or the last important interaction between employer and employee, the severance discussion.
Here are five tips for cutting the best severance deal for you, despite the recession: 1. the most important thing for employees at all levels to understand is all severance packages are not created equal. Even if your company has a policy that says every employee at a certain level, with certain tenure, receives X weeks or X months of salary as severance, decisions ultimately are made on an individual basis. You can always negotiate a better deal.
2. Know your leverage. Remember that Leverage is the currency you have to trade with your employer in severance negotiations, Examples of leverage are(1) the employer wants to protect against you criticizing the company after you’re gone;(2) the employer wants to protect against being sued, particularly if you’re an older worker, a woman, or in a racial minority; or (3) the employer may need you for something later, such as testifying in a lawsuit or providing information to a replacement.
3. Even if you’re a seasoned negotiator, you should prepare for your severance discussion like you would a big job interview. . Know exactly what you’re going to say. For example, if you say, “I think this could be age discrimination,” the negotiations will immediately be over. But if you say, “Are you getting rid of me because you think I’m over the hill?” it raises the same issue, but in a way that isn’t an accusation. It can even induce sympathy from your boss.
4. Be creative and look at whether you’d be better off converting some of your non-cash severance benefits to cash, or vice versa. If you are interested in going back to school, you might ask the employer to convert part of your cash payment to a tuition benefit, which will reduce the amount of taxes you have to pay on your severance check. Many employers offer outplacement services. If you are planning to start your own business or already have a new job lined up, you might ask your employer to convert this benefit to cash. Use creativity to customize the deal to your needs.
5. 401(k) vesting is negotiable. I have a friend who was three months away from his 401(k) vesting when he was laid off. In his severance negotiations, he asked if he could be kept officially on the payroll until his vesting date. The employer agreed – resulting in an additional $20,000 in his 401(k) account that would have gone away if he hadn’t asked. Chances are, the timing of 401(k) vesting is the last thing on your employer’s mind when they lay you off. But employees have successfully argued in lawsuits that they were fired so their employer wouldn’t have to vest them. You can use this fact as leverage in your severance discussions.
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