Career Development

How Severance Pay Works for You

You may be eligible to receive severance pay from your employer if you are laid off from your job because of circumstances beyond your control. A severance package can help you financially as you search for a new job. This article explores the details about severance pay and how to get your severance pay when you need it.

What is severance pay?  

Severance pay is usually part of a package of pay and benefits that are limited to a certain time period. An employer might offer severance pay to an employee upon involuntary dismissal from their position. Employers are not always required to provide severance pay, but you could be eligible for severance depending on your situation.

You may be eligible for a severance package that could include the following:

  • Salary
  • Benefits, such as healthcare or life insurance
  • Payment of accrued paid time off (PTO)
  • Full or prorated bonus
  • Additional assistance

Your employer usually decides which of these you receive and their amounts. This can be based on the number of years you’ve worked for the company. A common severance pay structure provides a week’s salary and benefits for each year an employee has worked.

Your employer may have severance policies in place specifying who is eligible, under what circumstances and what amount they should receive. 

Employers may have limitations on severance packages, including:

  • Whether part-time employees are eligible
  • Maximum and minimum amount the company offers
  • When an employee should receive the benefits
  • Other circumstances

How to negotiate severance pay 

These are the steps you can take to discuss severance pay with your employer and negotiate a package that fits your needs:

1. Firstly, research industry trends on severance pay

Consider networking to find out about the severance packages other companies in your industry offer. A simple way to do this is to ask your professional contacts about severance packages at their companies.

2. Secondly, check the severance pay policies of the company you work for

Research online and in your professional network to find out more information about severance pay policies. You should also check your employer’s severance pay policy to understand when severance packages are provided.

3. Next, set up a meeting with your manager to discuss severance pay

You can negotiate your severance package after conducting research and being prepared to describe your value to the company. It is important to identify reasons your employer should offer you a severance package or improve an existing package.

Here are some common severance negotiation topics you can discuss with your manager:

  • Length of time you have worked for the company
  • Your achievements and contributions
  • Relevant documents that detail the employment benefits you currently depend on, such as medical care

4. Be confident and professional during your meeting

Your research and preparation will help you to handle your meeting confidently and professionally. 

Consider the following tools to help you prepare: 

  • Gather and organize all the information you need before the meeting.
  • Make a list of things to discuss and questions to ask.
  • Practice out loud what you are going to say. 
  • Ask a friend to help you prepare and role-play to help build your confidence. 

5. Ask for a formal severance pay agreement or contract if you are offered severance pay

It is important to get a formal agreement or contract so that you are prepared for the future.

A formal severance pay agreement has these features:

  • It is a written agreement that your employer signs.
  • It contains the resources your employer agreed to provide. 
  • It lists the conditions for getting severance pay, such as a non-compete agreement.

6. Finally, check the severance pay agreement thoroughly

You should read the agreement carefully before you sign it to make sure it contains everything you agreed on during your meeting.

Asking for a formal severance pay agreement at the start of your employment is the best way to get that pay when you need it. However, if you find yourself without an agreement, you can negotiate severance pay. 

To ensure that severance pay works for you, consider starting your research on the industry trends and following the steps suggested in this article.