3 Severance Pay Questions Every Employee Should Ask

Research your options before signing off on a severance package.

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Due to the growing number of layoffs that have occurred at companies nationwide over the last few years, severance pay is a hot topic. Severance is a specified amount of money you would receive in the event of being laid off or taking voluntary, early retirement; you'd earn the payment in addition to your salary. If you quit your job, however, you'd be ineligible for severance pay.

Here are three severance pay questions every employee should ask:

Am I entitled to severance if I am let go?

Companies are not required to give you severance. But your employer may offer it if it has a solid relationship with its employees and wants to stay in the good graces of anyone it lays off. A company may also offer severance as a way to negotiate with you to get you to give up your legal rights (this typically means you can't sue the company for firing you or laying you off if you sign an agreement.)

If you are fired for misconduct, however, it is unlikely that your company would offer you a severance package. Still, there are some cases where you are legally entitled to severance. Such as:

  • Your employment contract stipulates your entitlement to it.
  • Company policy states that employees are entitled to it.
  • Your company conducts a massive layoff without giving 60 days' notice (see the W.A.R.N Act)
  • How is severance calculated?


    If your company doesn't have a policy specifying the formula for determining your severance package, you may have some room to negotiate the number. But in general, there are certain factors that go into the calculation:

    • Number of years you've worked at the company.
    • Your level in the company (such as management or executive).
    • Company size.
    • Whether you had severance listed as part of your employment contract.
    • Don't immediately sign a severance package offer; it might be negotiable. While it might seem harsh, pulling the guilt card might help you negotiate a better deal. It's up to you to ask for more.

      Is all severance monetary?

      Severance doesn't always come in the form of cash. Many companies will extend health benefits for a period to employees they lay off. This can help cover your medical expenses until you secure your next job and benefits. Your severance package may also include other benefits, like life insurance and career coaching. Many companies work with outplacement consultants to help you find your next role, which is a perk in the current job market.

      What You Should Know

      You should consider if and how the severance package will affect your ability to claim unemployment insurance. Also consider how the payments (lump sum or continuing salary payments) will affect your tax liability.

      It's a good idea to have a lawyer review any document your soon-to-be former employer wants you to sign, especially with regards to giving up legal rights. Never feel forced into signing a document on the spot, especially when you're carrying the emotional weight of being let go. Ask to take the severance package information home and review it when you have cleared your head.

      In general, a severance package is designed to ease the pain of being fired or laid off. The money can help tide you over until you find your next job, and can keep you from worrying about how you will pay your bills in the meantime.

      Lindsay Olson is a founding partner and public relations recruiter with Paradigm Staffing and Hoojobs.com, a niche job board for public relations, communications, and social media jobs. She blogs at LindsayOlson.com, where she discusses recruiting and job search issues.

      TAGS:
      unemployment
      benefits
      salaries
      careers

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