Laid Off? Negotiating The Best Severance Package
The threat of a layoff can leave employees fearful for their financial stability, especially if their savings account is unable to sustain several months of living expenses. That's why those who are laid off and eligible for a severance package are, more often than not, willing to agree to the first offer the company puts on the table without question.
However, with the national unemployment rate hovering at 8.2 percent as of August 2012, it's in workers' best interest to remain level-headed and calculative about their exit strategy. Doing so can help secure a better severance agreement that enables them to successfully move on from a layoff both financially and professionally.
The process for preparing a seamless negotiation will vary, depending on the company and the employee's clout in the workplace. However, there are a few important considerations that apply to any layoff situation.
#1. Don't Get Hasty
Before instinctively flinging your rage at your supervisor or human resources manager, bear in mind that you've hit an integral point with the company. How you react and conduct yourself emotionally moving forward will likely dictate whether your request for more money or benefits will be considered.
This is not a time to bash in the copy machine or other company-owned property. Doing or saying anything malicious against the company or your superiors can cost you leverage in negotiating severance terms and even transcend to poor recommendations about your conduct to prospective employers.
Take a deep breath and use your energy to formulate your plans instead.
#2. Choose Benefits Wisely
Focus more on adding company-paid services to your severance package rather than hard cash. Companies are more flexible about adding these kinds of benefits, as they can be less expensive than increasing your cash payout.
Services include items like extended health care coverage for you and your family; this is especially crucial if you have family members in need of regular medical attention. Or if you relocated to accept the position but can now no longer afford the cost of living, requesting that the company pay for relocation expenses can go a long way.
Outplacement services for a certain period of time are an attractive benefit, as they can arm you with the skills and tools to succeed at finding a new job. As a new unemployed worker, you'll need to utilize every avenue possible to showcase your desirability; outplacement programs can help through resume writing workshops and networking events.
Also, never leave the negotiation table without guaranteeing yourself a sterling letter of recommendation. Being able to demonstrate that despite being let go, the company would hire you again sends a positive message to potential employers.
No matter what you ask for, however, your ultimate goal should be to walk away from negotiations with what you really want. Sam Dogen, better known as the "Financial Samurai" and author of How to Engineer Your Layoff, explained to GoBankingRates.com, "The number one non-financial benefit of engineering your layoff is satisfaction. You have taken control of your own destiny to leave your company on your own terms, and not by the whims of the economy, or the terms of an insecure boss, or by strangers in upper management who don't even know your name."
#3. Give A Little To Get A Lot
If you get the sense that your employer is still hesitant about expanding your severance benefits, try appealing to the company's needs and goals. Does the person taking over your duties require training? Were you fully vested in managing a client's project that's near completion, and know that the relationship you've built with the client can lead to more opportunities for the company?
If so, offer to carry out these tasks and focus on the benefits the company can reap by allowing you to delay your layoff until these actions have been carried out. Making the transition easier for the company may encourage them to be all-ears to your demands.
#4. Know Your Rights
Understand that unless your employment contract or company policy explicitly states that you are to receive a severance package, the Fair Labor Standards Act does not require companies to provide severance offers to every employee they layoff.
Companies give their employees severance packages as a goodwill act, so there is no bad blood against the company and to avoid costly and time-consuming litigation in the future.
Usually severance agreements include documents meant to protect the company. These can include non-disclosure, non-compete and even non-solicitation clauses that prevent you from encouraging other employees to part with the company.
Employees who are 40-years-old or older are entitled to at least 21 days to review the severance agreement under the Age Discrimination in Employment Act. If the layoff was conducted in a group setting, that review period is extended to 45 days. If this requirement applies to you, take the time to have all the severance documents reviewed by a professional just to be safe.
#5. Document Everything
Every conversation with your employer regarding a promise or offer should be documented. After a meeting, immediately send a follow-up email to summarize the details discussed.
When writing the email, make sure to include the date the conversation was held, the specific items that you requested and the items denied, the outcome of the conversation, and a request for your employer to confirm receipt of the message and that everything that you understand to be true is, in fact, correct.
Is Negotiating A Severance Really Worth It?
The temptation to hold onto the initial offer is natural, but some fail to recognize that severance agreements are a business move made by companies to ensure you transition out amicably and without complaint.
"Those who engineer their layoffs will feel an immeasurable sense of pride and a new-found courage that anything and everything is possible," says Dogen.
And in truth, severance packages are as negotiable as negotiating your salary upon being hired. You may not necessarily receive exactly what you want, but there may be leeway for extra benefits that can help you in the short- and long-term.
Petitioning for more in a severance package isn't something to be embarrassed about either, nor should you feel too intimidated to ask. Essentially, there is nothing at risk by negotiating, since you're already on your way out.
By Jennifer Calonia for GoBankingRates.com.
Jennifer Calonia is a reputed journalist covering breaking news about banking, savings, investments, loans and personal finance that matters most to your wallet. Her expert advice encourages and empowers households across America to achieve financial balance.