"With almost a decade of professional experience, I’ve been through it all. I’ve quit, been furloughed, freelanced, and found my way back to full-time work. My friends and colleagues have been through similar journeys, too: One has been laid off every single year for four years straight. Another is building her own freelance business, and another is embracing a period of “funemployment.” With an uncertain job market and the economy on the brink, my friends and I are getting nervous about our financial futures—and we’re not alone.
Money makes the world go ‘round, which is a scary thought when you’re unexpectedly on the job hunt. Unemployment only goes so far (if you qualify for it), and savings can help in emergencies, but nearly 60% of Millennials live paycheck to paycheck. Severance packages, if you get one, are one of the few things that can help make unemployed seasons bearable.
I admittedly didn’t know much about what or how to negotiate for my first job out of college—I certainly never considered discussing severance. Talking about what happens when you leave the company can feel like discussing divorce before you’re married. But I know now that severance discussions can act as a prenup, outlining fair details if anything goes in a different direction.
Based on our experiences between roles, bracing for layoffs, and worrying about the state of pretty much everything, my friends and I have learned that being prepared is more important than ever before. Severance is something we will never leave on the table, and you shouldn’t either. Ahead, I’m sharing everything you should know about severance, and how to negotiate it before you ever need it.
What is severance?
Severance is compensation that an employer pays to an employee when their employment ends. Contrary to popular belief, this doesn’t just apply to layoffs (more on that below). Severance can include a monetary component like a certain percentage of your salary or what you’re due for unused paid time off, but it might also include things like continued healthcare coverage, stock options, outplacement assistance, skill training, or additional professional services to help you find your next role.
How do I know if I’m eligible for severance?
There are, unfortunately, no federal or state laws in the United States mandating severance payments. Crazy, I know. (Other countries, especially in Europe, are another story.) That said, most organizations make it their policy to offer some form of severance to stay competitive, and there are several situations when severance might come into play. For example, if you’ve been laid off or dismissed or have resigned, you might be eligible for severance depending on your company policy.
Before accepting any new role, check your contract for your company’s specific severance details. If you’re currently employed, you can likely find this info in your employee handbook, too. If you can’t find any details, don’t assume it doesn’t exist for you, but do ask your HR representative about it so you’re informed!
When can I negotiate severance?
Depending on your industry, role, and level of experience, you might be able to negotiate severance before you even begin a new position. In fact, you can (and should!) bring it up during the interview phase as part of regular negotiation discussions, alongside things like salary and PTO time. Even if you aren’t able to customize the details, knowing more about the company’s severance policy can give you an idea of what a future package might include, like how long, if at all, you’ll have healthcare benefits.
“Severance discussions can act as a prenup, outlining fair details if anything goes in a different direction.”
If you can’t negotiate severance at the start of a position (or you never did), it is potentially negotiable when you part ways with an organization. When a severance package is initially shared, consider any additional requests you’d like to make or discussions to have before signing any documents. Is there an opportunity to transfer to another department? Can you swing an extra month of 401k contributions? What about a continued visa sponsorship? These are all more-than-reasonable asks!
What can I negotiate when it comes to severance?
Financial compensation
The largest piece of a severance package often boils down to money. The dollar amount of a severance offer is often based on time with the company and usually includes payout for unused time off, stock value, and unpaid bonuses, commisions, or reimbursements too. Depending on industry, recent performance, tenure, company policy, and reason for departure, you might be able to negotiate other things like a larger payout or different stock options to cover expenses while searching for your next role.
Length and timing of payment
The length and timing of a severance period is just as important as the actual benefits you’re set to receive. Some organizations opt to pay severance on a monthly basis for a predetermined period of time—depending on your package, this could mean a very small amount each pay period instead of one lump sum. Severance packages might offer continued insurance coverage for a set period of time as well. Consider asking to adjust the severance schedule based on what works best for your needs.
Benefits and other perks
When money is on the mind, it can be easy to forget about what else you might be losing, like your benefits. A common issue that people run into is losing healthcare—which can be extremely costly out of pocket. In your negotiation, ask for extended health coverage, or ask for a stipend to cover out-of-pocket healthcare costs. Before this, do some research to understand just how much it will cost you so that you know how much you’ll need. For example, will new health coverage cost you triple what you pay now? Will your prescription costs double?
In addition to this, you can negotiate continued contributions to your 401(k), especially if you’re receiving severance pay over time. Finally, if you have stock options, you can ask for accelerated vesting. If neither are possible, a cash payout is always worth asking for.
Career support
Now that you’re headed on the job hunt, you’ll want all the support you can get, and yes, you can negotiate that too! For example, some employers offer outplacement services, like career coaching, resume writing assistance, or job placement services. Don’t forget to ask for a positive reference letter while you’re at it too.
What should I do if I don’t get severance?
As with all negotiation, the worst answer you can get is no, and unfortunately, that is the case for some people. I’ve been there, and so have many of my friends. When this is the case, it may seem like you have to go straight to the job boards and unemployment office. Of course, you’ll want to do those things, but don’t be so quick to panic—there are more ways you can put yourself in a positive position. For example, ask to stay top of mind for any new roles that might come up within the company, and in the meantime, connect with with your manager and colleagues on LinkedIn. While you’re at it, ask around to see if anyone has any industry connections or job leads that could be helpful for you.
While you search for a new role, use your extra time to upskill or take on freelance work if possible. This can help you earn more money in the future or make some in the meantime too. With all of this being said, keep your head up and look at this as an oppurtunity to advance your career long-term. You never know what door will open up for you next.
Jessica Ivetich, Contributing Writer
Jessica is a freelance writer and digital marketer with nearly a decade of brand and agency experience. Contributing to The Everygirl since 2022, she is also a proud Midwesterner, Formula 1 fan, and book lover who’s always looking to learn something new.