A severance package is a contract between an employer and an employee that is sometimes offered when the employee leaves the company. Often, as part of the severance agreement the employee must agree not to sue the employer. In exchange for this, the employer offers severance pay. In many cases, employees have at least 21 days to accept a severance deal, and are able to negotiate the severance terms. Depending on your situation, it may be helpful to have a lawyer review your severance package before you agree to it.
How much money should the severance pay be?
There are no federal or state laws requiring an employer to offer any severance package. However, when it is offered, the amount of money included in a severance package is typically based on how long you were with the company, why you are being let go and your employer’s financial situation. Sometimes the severance pay is continued salary over a certain amount of time.
Some of the factors you may be able to negotiate include:
- The amount of severance pay.
- Receiving severance money up front or spread over time.
- Including accrued but unpaid benefits like bonuses or paid time off.
- Your employer paying health insurance premiums for a period of time.
- Free outplacement assistance.
Nonfinancial aspects of a severance package
When analyzing the severance package you have been offered, you should pay close attention to details about a general release of liability and a non-disparagement clause. In a general release of liability you will be expected to release your employer from any potential liabilities, but it may be appropriate to make it mutual by asking your employer to release you from any potential liabilities.
A non-disparagement clause will prevent you from saying anything negative about the company, but it could make job hunting more difficult. It may prevent you from being able to truthfully explain to a potential employer why you left your last job. While setting some limitations to a non-disparagement clause may be a good idea, you can also consider making this clause mutual.
When negotiating a severance agreement there are several factors to consider to make sure you are getting the best deal you can. However, it is also important to realize you may not get everything you want from your severance agreement. That is why it is important to understand all of the components that can be included in a severance agreement, so you can pick which components you want to fight for in negotiations.