Inflation is rising and recession is looming. Even the most prominent names in finance, tech, media and finance are unable to escape the cuts in budgets and waves de-leveraging that accompany economic contraction.
Over the past six months, more high-ranking executives at all levels have been wondering about the one part of an employment contract they hope to never need to see: the severance agreements.
Let’s look at the three most common questions executives ask about severance:
What is the best time to receive a severance package?
- A severance package is also known as a separation agreement or a severance deal. It provides benefits to employees whose jobs have ended, typically due to restructuring or downsizing.
- The purpose of severance is to help employees transition from the company. It provides financial support and assistance while they look for new positions.
- Your employer may offer you monetary payment, stock options, and health coverage. In return, your employer offers you a set of benefits — monetary payment, stock options, and health care coverage.
- Only employees who have written severance agreements into their employment contracts or collective bargaining agreements are eligible for benefits in the event of an unexpected termination.
You can also sign the contract and be legally bound by it. This means that you could permanently waive your right to sue your former employer.
What benefits should my severance package include?
SEVERANCE PAY
While there is no standard to determine the amount of severance, most monetary benefits are based on your salary over a time period.
This is often calculated in terms of weeks or months of your salary. An agreement may allow you to receive payment according to your salary up to three months following your last day of work.
HEALTH BENEFITS
Federal law requires that your employer offer you health insurance for 18 month after your departure, at the same rate as your previous corporate rate.
These benefits are known as COBRA benefits after the 1985 Consolidated Omnibus Budget Reconciliation Act. If you have received $800 in health benefits per month, you will be eligible for COBRA for the next 18-months.
MONEY OWED INDEPENDENTLY OF SEVERANCE PAY
As a separate payment, any previously promised compensation may also be included: unpaid commissions or bonuses, reimbursements for business expenses, vacation days unused, personal/sick time, and so on.
OTHER FINANCIAL BENEFITS: PENSION, PROFIT SHARING, 401(K), LOAN REPAYMENTS, STOCK OPTIONS
Employees who are leaving have usually 90 days to exercise their stock options prior to them expiring. In your severance agreement, you can request an extension of this 90-day period.
OUTPLACEMENT SERVICES
It is now common to receive severance benefits that include connections to agencies or programs that can assist you in your future job search.
These services can include assistance with resume writing, editing, interview preparation or targeted company searches.
How can I make more money from my severance offer?
You can negotiate a separation agreement and treat the offer in front of your as a proposal.
However, how much leverage you have will determine how much you are able to negotiate for your advantage. To significantly increase your offer, you will need to have a lot of leverage.
If your departure was tied to:
- A complaint of sexual harassment
- Being pregnant,
- A serious illness
- Jury duty
- Family Medical Leave
- Overtime payment withheld
- Whistleblower complaints or
- or any form of discrimination (gender and race, religions, national origins, sexual orientation, disability, age, if you’re older than 40).
These cases may be applicable to you and could give rise to a lawsuit. You might have the power to negotiate a significant increase in your severance pay.
You are less likely to see significant changes in your overall severance package if you don’t have the leverage of a wrongful termination claim. You can ask for improvements in other areas, however.
- Extended health benefits payments
- Agreements not to challenge unemployment benefits
- Acceleration of stock options that are not vested
- Cash payment of outplacement services and unused vacation days
There are many restrictive covenants you may face, including non-compete agreements and non-solicitation clauses. This could impact your next job search.
Summarized from an article by Ottinger Employment Lawyers.
