When you find yourself laid off or otherwise terminated, a severance package can offer vital support for you, your family, and your career. However, you may be able to receive more than the initial package your employer offers you as well as additional or customized features that will be best for your personal financial and career situation. How can you ensure you receive a severance package that meets your needs?
Ask to see the severance plan before agreeing to resign.
Many employers will try to force you to agree to terminate and accept a severance package before the actual document is provided, especially in circumstances where the alternative is a performance improvement plan. You may want to insist on actually seeing the document first. If you don’t know the terms, you can’t make a fair decision.
Wait to sign a severance agreement.
While it can be tempting to move forward right away when offered a severance agreement, especially if you have a limited time to sign, you may want to pause before signing. Rushing into signing the agreement could lead you to make an emotional decision rather than a financially sound choice. In addition, you may need advice from professionals, including a financial advisor, depending upon the proposed payments.
Carefully review your severance agreement.
A severance agreement is a contract, and it is important to carefully review the terms of that agreement before signing. What is your employer offering you? Does the package include compensation for unused time off? Does the contract involve a nondisclosure agreement or noncompete agreement that could limit your career in the future? Does the contract contain errors, vague wordings or unclear terms? Careful review of the document provided by your employer ensures that you fully understand what the agreement entails before you sign.
Review your documents.
In some cases, your employment contract or employee handbook may provide guidance for the terms of your severance package. Be sure to review these documents to ensure that the offer your employer provides matches what they have promised. Additionally, severance agreements often include other documents by reference, particularly previously signed non-compete agreements or non-disclosure agreements, so locate and study those as well.
Do your research.
Financial decisions are complex, and you may want to do research to help you identify whether your severance package is fair. This can include looking at your finances to see if the offer matches your needs. You may compare the package offered to you with other offers at similar companies to see whether the terms seem reasonable. Researching how long it might take to find a new job in your field could help you identify whether the pay and other benefits offered will last long enough.
You may find it best for you to receive a portion of the severance in different tax years, or to fund your 401(k) in lieu of cash payments, but this is a custom provision which will depend on your financial planner or accountant’s advice.
Consider whether you have potential legal claims and, if so, whether you are being compensated to waive your right to pursue our legal claims against your employer.
Reviewing whether a proposed severance agreement is fair, including a careful review of whether you have any potential legal claims against the company. The company is essentially buying out your legal claim and requiring you to waive any potential claims in exchange for severance.
Look at the big picture.
It is very important to ensure that the terms of your severance agreement facilitate your re-employment. This may mean retaining you in employment status while you seek re-employment, paying for placement services, and providing written and/or oral references. Severance
Do not be afraid to negotiate.
Severance packages include many different benefits, including severance pay and continued insurance coverage. Some employers may also offer outplacement services to help you find a new job or detail what will happen to your retirement benefits, your stock options and any company perks you received.
Negotiating the agreement could help you achieve better outcomes if anything offered does not match your expectations. You may be able to secure more severance pay, additional insurance coverage or other benefits through the negotiation process.
And don’t forget to consider crucial non-monetary additions to the agreement which may be very important for your career, and no real issue from the employer’s point of view.
Seek guidance from an experienced employment law attorney.
While reviewing and negotiating a fair severance agreement can be daunting, you do not have to face this process alone. An attorney can help you review the severance package offer you received, ensuring that it reflects your contract and other statements by the company. They can also help you understand your rights in this situation, identify potential points to discuss with your employer and bring experienced negotiation skills to the table.
With the right information and support from a skilled attorney, it is possible to reach a fair arrangement that protects your finances and helps you move forward with the next stage of your career.