Even in a fairly stable economy, job security can be fleeting. At a moment’s notice, and without warning, you could be ushered into a conference room and asked to sign a “separation agreement.” Although imminently displaced workers may not have much leverage in such situations, that shouldn’t stop them from trying to negotiate a better severance package. Here’s what you need to know:
Don’t Sign Anything
Don’t sign anything on the spot, since the separation agreement may contain a waiver of claims, advised Sam Perkins, a labor attorney and founding partner of Brody, Hardoon, Perkins & Kesten in Boston, Mass.
Employers are required to give employees some amount of time to consider a severance agreement, he said. Plus, you’ll need time to get over the shock, run some numbers and come up with a strategy. And since employers want to avoid claims and lawsuits, it makes sense to use your signature as a bargaining chip.
“If you receive a check, hold onto it if it includes severance,” said Pattie Hunt, Sinacole CEO and founder of First Beacon Group LLC, an HR advisory firm located in the Boston area. “Since cashing it may imply that you’ve accepted the terms and package.”
(Almost) Everything’s Negotiable
Although companies often use a formulaic approach to calculate severance, that doesn’t preclude you from negotiating a better deal. In fact, as long as you’re reasonable, and the company is solvent, Sinacole says employers will usually give you something more as long as you ask for it.
“The rule of thumb is one to four weeks of severance for every year of service, but you should always ask for an extension,” she said.
Calculate how long it will take you to find a new job or update your skills, and use that as justification for more severance. Another alternative: leverage your institutional knowledge by offering to provide ongoing technical support and advice in exchange for additional severance. Remember, you have nothing to lose at this point, so don’t be afraid to play the guilt card.
You may also be able to bargain over whether you get severance in a lump sum or as a salary continuation. Staying on the payroll may allow you to keep your insurance coverage but delay your ability to collect unemployment.
“Consider your circumstances and personal needs in formulating your request and strategy,” said Perkins. “For instance, if your family has health issues, asking your employer to pay for COBRA or extend your health insurance for a couple of months might be more valuable than another week or two of severance pay.”
Your employer will probably let you keep your cell phone and laptop, Sinacole added. Since organizations often pay for training courses and conferences in advance, seize the opportunity to network and enhance your marketability by asking to participate in those events through the end of the fiscal year. Likewise, ask your employer to honor previous commitments to reimburse you for certifications or tuition.
And keep in mind that it’s customary for large employers to provide outplacement services. If you haven’t changed jobs in a while, you might need assistance with resume writing, interviewing and goal setting.
Be sure to ask for a pro-rated bonus, if bonuses were part of your compensation package. And finally, always request a positive reference before signing a release of claims.
“Your agreement should state that you will receive a positive letter of reference,” Sinacole said. “Any promises made over the negotiating table should be documented in writing.”
Consult a Lawyer
It may be advisable to consult an attorney if you worked for the company for a long time or have a complex case.
“Most attorneys will give you free consultation,” Perkins said. He or she can determine whether you have the basis for a wrongful termination, retaliation or discrimination claim, or sufficient leverage to demand a larger payout.
For instance, a consultation might be worthwhile if you’re owed large matches to a 401(k) plan, salary increases, deferred compensation, stock options or stock, or if you made significant contributions to a startup.
“A lawyer can help you create a narrative around retaliation or age discrimination if it applies,” Perkins said. “In many cases, just sending a letter to your former employer laying out your case may increase your bargaining power and severance package.”