Being Laid Off? Negotiate That Severance Package

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Just about anything involving money is a source for negotiation, but many people don’t think about the fact that their severance package is as well. Although we don’t want to think about that day when we may be laid off, it’s important to be prepared to negotiate our compensation package. Especially if you’re in a higher position in your company, don’t leave without negotiating your severance package.

Why?

First, it’s important to realize that your employer is under no obligation to offer you any type of package upon leaving but providing you aren’t let go for issues involving wrongdoing, it is often in a company’s best interest to offer you some type of package.

Companies don’t want you badmouthing them, going to work for one of their competitors and sharing sensitive information and they don’t want you so sue them for wrongful termination. In short, they want you to exit cleanly and quietly and they’re often willing to compensate you for it.

If you are laid off in a mass layoff situation, you probably won’t have much leverage in negotiating a package since a standard package is often offered to all who are laid off. Still, don’t be afraid to try because the extra cash could come in very useful in your future job search.

What should be in my Severance Package?

Of course there is no standard package bust most have these parts:

Compensation - A common practice is to offer you one or two weeks of pay for every year you worked for them and if you’re in upper management or other executive position, you may get an even larger amount. If your field is specialized which would make the time it takes to get a new job much longer, negotiate a higher payout. If you can get four weeks of pay for every year worked, consider that a victory.

Health Insurance – Health insurance is expensive. If you have to enroll in the COBRA plan which allows you to continue health insurance coverage after you leave your job, you are going to pay a much higher amount than you were when you were employed. Try to get your employer to pay for health insurance for a certain period of time. If you can get 18 months or the start of a new job, this would be a victory for you and your family.

Outplacement – Ask your employer for a favorable letter of recommendation as you leave. Ask to draft the letter yourself so that your accomplishments are highlighted correctly and prominently.  Some employers will also pay for job search services that will help you get a job similar to your last position.

Perks – Did your former employer give you a laptop or other perk? Negotiate a deal where you could keep these perks, at least until you find your next job. Of course this is low on the list of deal breakers but something like a laptop may assist you in finding a new job.

Announcement - Negotiate an agreed-upon date and type of announcement about your termination. Maybe you’re taking time off to be with family, moving out of the area, or simply moving on but this announcement is what will make its way around not just the office but colleagues in your industry. You don’t want to look for another job in your industry with the rumor mill buzzing about your firing.

Now that you have your severance package negotiated, make sure that you consult an attorney if the language isn’t clear to you. Once you sign it, it’s in effect so make sure you know exactly what you’re getting and committing to.

What’s Next?

If you’re laid off or fired, apply for The Federal-State Unemployment Compensation Program. Your taxes have been used to pay others who are in your situation so you should take benefits as well if you qualify. This compensation package will last for 26 weeks and your eligibility is governed by state law (recent economic stimulus funding has temporarily extended this to 99 weeks in many states). Often, you must go to the county agency who governs this program but in some states and localities, the application can be completed online.

Hold Your Head High

It’s happening to many people around the world and often layoffs have nothing to do with you as a person. See it as a business decision instead of a personal decision and be prepared to negotiate an equitable severance package with your employer.

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{ 1 comment… read it below or add one }

andys2i December 31, 2010 at 5:42 pm

Received the following question from a subscriber : Can I get my pension money if I am laid off?

According to the DOL, Generally, if you are enrolled in a 401(k), profit sharing or other type of defined contribution plan (a plan in which you have an individual account), your plan may provide for a lump sum distribution of your retirement money when you leave the company.

However, if you are in a defined benefit plan (a plan in which you receive a fixed, pre-established benefit) your benefits begin at retirement age. These types of plans are less likely to contain a provision that enables you to withdraw money early.

Whether you have a defined contribution or a defined benefit plan, the form of your pension distribution (lump sum, annuity, etc.) and the date your pension money will be available to you depend upon the provisions contained in your plan documents. Some plans do not permit distribution until you reach a specified age. Other plans do not permit distribution until you have been separated from employment for a certain period of time. In addition, some plans process distributions throughout the year and others only process them once a year. You should contact your pension plan administrator regarding the rules that govern the distribution of your pension money.

One of the most important documents you should have is the Summary Plan Description (SPD). It outlines what your benefits are and how they are calculated. A copy of the SPD is available from your employer or pension plan administrator.

In addition to the SPD, your employer also may give you-or you may request-an individual benefit statement showing the value of your pension benefits-the amount you have actually earned to date and your vesting status. These documents contain important information for you, whether you withdraw your money now or later.

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