If you’re laid off, the first thing you should be concerned about is getting your severance — and be prepared to negotiate for more money or services rather than accept the first offer.
“We’re going to have to let you go.” No one wants to hear that sentence at work. But these days, more and more people are hearing it. Getting laid off is always a shock, and for most people, the initial shock wears off only to leave behind a slew of other fears and worries — what comes next? How will you make ends meet until your next job? What benefits are you entitled to? What about severance pay?
In the U.S., most employees aren’t entitled to severance. However, that doesn’t mean companies don’t routinely offer it when employees are laid off due to no fault of their own, or even when employees are laid off due to performance, but not conduct, issues. Here’s what to expect, and how to negotiate a better severance package.
What Severance is and Why Companies Offer It
Most severance packages include a lump sum cash payment intended to replace your income for a period of time after a layoff. The amount of cash you’ll be offered will depend, in most cases, on your company’s policy and the formula they use to determine severance. It’s typical to expect one or two weeks of severance pay per year of employment — so if your company offers two weeks of pay per year of employment and you were employed for 10 years at that company, you might receive 20 weeks of severance pay. Some companies might offer more or less cash, at their discretion.
Severance can also include continued health insurance coverage under COBRA, which you’re entitled to regardless, as well as other benefits like outplacement services or career coaching. Career coaching and outplacement services, resume help, and even office space can be available as part of severance, and are a common part of severance packages for executives.
For the most part, companies offer severance because it helps laid-off employees transition to new employment faster and leaves them less likely to leave bad reviews about the company on Glassdoor. Perhaps more importantly, it’s an opportunity to head off the possibility of a wrongful termination lawsuit — your company can ask you to sign a release of legal claims when you accept the severance, and most employees are happy to release legal claims in order to get a severance, especially if they don’t actually have any legal complaints.
The only time you might be entitled to severance pay under the law in the U.S. is if your company violates the Worker Adjustment and Retraining Notification (WARN) Act. If your company has more than 100 employees and it is laying off at least 50 people, you’re entitled to at least 60 days’ notice of the layoffs. If you’re laid off with less than 60 days’ notice, you’re entitled to 60 days of severance pay.
You Don’t Have to Accept the Severance Right Away
You’ll usually have 21 days to accept a severance package, and a further seven days to change your mind after signing it. If you think you have an employment rights case you want to litigate, you can take the offer to an attorney or even turn it down entirely in order to pursue legal action. But even if you don’t think you have an employment case, it’s still a good idea to have an employment attorney look over your severance package. He or she might be able to get you more money from the company — most companies are willing to pay a larger severance to avoid the possibility of a lawsuit. It’s cheaper even if they think they’ll prevail.
You Can Negotiate for More
You don’t need a lawyer to negotiate for more severance, though. You can do that on your own. Make a case for more severance based on your accomplishments at the job and your contribution to the company, or the length of your service, if you’ve been with the company for a long time. If you’re fairly new at the company and you relocated for the job, you can use that to negotiate for more severance, on the basis that you made a major life decision predicated on the promise of long-term work. You might be able to get more money just by asking for it, even if there aren’t legal issues with your dismissal — human resources people don’t like laying off employees either and can be sympathetic. You should also be sure to ask to be paid for any sick time or vacation days you accrued but didn’t use, and you should make sure to continue your health insurance coverage. You can even ask for career coaching, additional training, or outplacement services.
If you’re laid off, the first thing you should be concerned about is getting your severance — and be prepared to negotiate for more money or services rather than accept the first offer. You may or may not be able to get more — but it’s worth asking, and you might really need it later.