3 Mistakes Employees Make When Negotiating Their Severance Package

Written by
Rebecca Smith

Jul 25, 2020

Jul 25, 2020 • by Rebecca Smith

Getting let go from your job, whether you are fired or laid off, can be a stressful experience. Oftentimes, to help ease some of the stress caused by losing your job, your employer will offer severance pay. While severance pay is not required by law, many employers choose to give employees severance packages to reduce any sort of legal liability they may have in the future. 

How much severance pay you end up getting generally depends on factors like how much you were paid and how long you were employed. However, severance pay is based on an agreement between an employee and the employer, so it can be negotiable

As you prepare to negotiate your severance package, make sure you avoid these three common mistakes:

Failing to Understand the Terms of Your Severance Agreement

Many times employees make the mistake of signing a severance agreement without fully understanding the terms of the agreement. A severance agreement is not just about how much you will get paid after you get let go, but what the employer gets in return. The employer can have you waive certain legal rights when you sign a severance agreement. You can be asked to waive the right to sue for wrongful termination, harassment, or discrimination. You can be asked to keep the agreement confidential and not talk about the company. While getting your severance pay is a good thing, make sure you understand the other side of the deal before you sign. 

Not Negotiating at All

Unless you have an employment contract with the terms of severance already discussed, you can negotiate your severance package! As Houston-based Green Residential notes, “We don’t typically fail with things we’re good at. Failure generally occurs when we do something new or different. As a result, it expands your comfort zone and enhances your familiarity with challenging things. The more you fail, the bigger your comfort zone gets.”

You don’t have to agree to the first offer. Severance packages are typically personalized based on your position, experience, salary, and other factors, so make sure you know your value. If you have been a great employee for a long time, you can negotiate a longer or higher severance package. Remember, your employer is getting something out of a severance agreement too, so be willing to speak up and negotiate so you get a severance package you deserve.

Signing Too Quickly

When you discover you are being let go, you may feel frustrated and want to move on as fast as possible. This can lead to signing a severance package agreement too quickly without thinking it over, negotiating, or taking time to get an outside opinion on the agreement. Before signing, it can be helpful to talk to an experienced employment law attorney who can help you fully understand the details of your proposed severance agreement, make sure you aren’t signing away any important rights, and even help you in your negotiations for a better package. If you have been wrongfully terminated due to harassment or any other employment law violation, an employment law attorney can help you decide if it is better to hold off on signing your severance agreement so you don’t waive your right to these claims. Before you sign your agreement, consider taking the time to talk it over with a skilled employment law attorney. 

If you are offered a severance package, you want to avoid making these common mistakes-- an employment lawyer experienced in negotiating severance packages can help you avoid these mistakes by looking over your agreement, helping you understand the terms, and assisting in the negotiation process.

Alternatively, employment attorney Drew Lewis put together a comprehensive article on negotiating your severance package that answers a lot of the common questions you might have. The article goes over topics like what is severance pay vs a severance agreement (there is a difference!), and why employers offer severance packages. Knowing these things can help equip you with some foundational knowledge to understand what you’re looking at.

Drew also goes over what is in a standard (or typical) severance package, which includes things like:

  • severance pay
  • COBRA health insurance continuation
  • general release of claims
  • confidentiality agreement
  • non-disparagement agreement
  • sign-on bonus clawbacks
  • non-compete agreements
  • unemployment insurance
  • workers compensation
  • vesting of RSUs and stock options
  • expiration of stock options

In addition to understanding what items may be in your severance package, the article also goes into detail about the reasons you may want to negotiate your own severance vs. hiring an attorney to help.

However, when hiring an experienced employment lawyer, they can help you understand your employers priorities, identify compelling reasons that can be used to negotiate your severance (you may have more leverage than you realize), and can negotiate with the company directly on your behalf.

No one wants to spend money on an attorney for something they can do themselves. However, if you’re unsatisfied with your severance package or you aren’t comfortable with negotiating or you just want to maximize the pay or benefits in your severance package, then hiring an attorney could be a good choice for you.

Before you hire any attorney, make sure they have experience in negotiating severance packages. Look for an attorney that is responsive, answers your questions, and is someone you feel comfortable trusting.