The secret negotiating power you have when you get laid off

Becky Straw was a single 29-year-old living in Manhattan when she was asked to resign from her job at Charity: Water. As the third employee at the organization, she had played a significant role in its meteoric rise.

Straw had worked at the organization for three years when the team offered her three months of severance and 24 hours to decide whether or not to take it. She panicked. Her entire identity was tied to that role. She had no plan B, a ton of grad school debt to pay off, and still needed to remain on their health insurance.

“The week prior, I had received a good quarterly review and $20,000 pay raise, so it was a complete shock,” says Straw. “I loved the cause and the team so much. In retrospect, I wish I had asked for more time to review their terms and to speak to more experts about my options. I had made a lot of personal, financial sacrifices for the good of the organization. But I wish I had advocated for myself more.”

Straw, who went on to create The Adventure Project, now in its 13th year, wishes she could tell her 29-year-old self not to take the package. 

“It’s important to remember that companies are buying something from you when they hand you that severance offer,” she says. “What are you willing to sell them?”

Like Straw, most employees don’t realize how much of an upper hand they have when they’re notified of a layoff and handed severance paperwork. 

Losing a job can be traumatic. It is an experience fraught with raw emotion, a drastic identity shift, health insurance considerations, and more. People are often shocked when they receive the news. Employers recognize that, and sometimes use that destabilization to their advantage. 

But most people don’t realize how much power they have at that same moment. There are many factors to consider when handed a severance package. Here are four unexpected tips to keep in mind when negotiating your own.

Your severance paperwork is a first offer. Always negotiate.

Cate Luzio, founder of Luminary, a global professional education and networking platform, thinks people should negotiate severance in the same way they negotiate their salary when taking a new job. 

“We need to advocate for ourselves on the way out just as we would on our way up,” Luzio says. “The point of securing a decent severance package is to offer the benefit of resources and time needed to find a new job without panic. As the job market tightens, especially for women in senior level positions, that process can end up taking longer than we want.”

Employment lawyer Lauren Paxton says laid-off employees must review all terms of the severance package, as well as any previously signed employment agreements and other employment documents. 

She also encourages employees to be proactive if they think a layoff is imminent.

“Depending on how senior an executive is in the organization, and how much leverage they have to negotiate the timeframe of their exit, it could be beneficial to approach the company proactively to influence the separation terms before the employer makes its own determination,” Paxton says.

Standard severance packages are shifting.

While packages depend on the level of seniority, number of years worked and other factors that may come into play, such as firm size and expectation of the level of negotiation the employee is likely to come back with, people often make the mistake of expecting severance to be their safety net.

Standard severance across industries used to include about one month per year worked, but has recently come down to about two weeks per year worked. But not every company is offering the severance packages that big tech offered in the highly publicized mass rounds of layoffs last year. Experts agree that “favorable severance agreements offer one month’s worth of salary for every year of tenure with the company; while more frugal packages provide just one week’s worth of salary for each year.” 

After eight years in a senior role at a mid-sized marketing firm, I was offered only eight weeks of severance. One week per year worked, which was, as lawyers advised me at the time, 50 to 75% below industry standard.

Ironically, I was laid off in the midst of writing The Setback Cycle, a book about career and business setbacks. The book included my own career setback story, which happened at that same firm years earlier after I returned from my 12-week maternity leave to learn that I had been removed from leadership positions on accounts I’d brought in and helped build from the ground up. 

When asking for an increase in my severance package, I also requested edits to the non-disparagement they had asked me to sign. My former employer responded by increasing the initial severance offer, but only in exchange for the right to oversee edits to my book, specifically the parts that referenced my time at the firm. They would retain the right to pay me only if they were satisfied with the changes I made before the book went to print. The deadline for my final manuscript was looming, and I was faced with an interesting decision to make. 

“The truth about severance pay is that the employer is ‘buying peace,’” says employment lawyer Barbara Gardner. “Almost every severance agreement contains a release of all claims that the employer wants signed. The employer will pay you to sign it.”

Like many people, I didn’t realize how much my employer wanted to “buy” from me until I was in the thick of negotiations. 

Not every departing employee has a book being published about career setbacks. I made the choice to walk away, signing nothing and accepting no payment. I didn’t feel it was appropriate for them to request that level of control over my forthcoming book, and frankly, the financial compensation they offered (what they were “buying” in exchange for those editing rights) was far too stingy to make the transaction worthwhile. 

Think beyond financial compensation.

Paxton also advises looking beyond the monetary compensation when considering terms you might agree to.  

She encourages employees to consider two main questions as they evaluate exit packages: What might be worth more than that money? What level of control do they want over your future?

“Although employees tend to focus on the dollar amount of a severance payment, there are other components of a severance package that might make sense to negotiate, such as the timeframe of continued employment before the termination date occurs, the length and scope of restrictive covenants such as non-competition or non-solicitation terms, the treatment of any vested or unvested equity compensation, and other items that may be of significance to the executive,” Paxton says. “Once someone is familiar with their pre-existing contractual rights, the better poised they’ll be to prioritize the terms for negotiation, either with or without counsel.”

There are also benefits and health insurance to consider since so many Americans rely on their jobs to provide that.  

The Consolidated Omnibus Budget Reconciliation Act of 1995 (COBRA) entitles a terminated employee to continue health coverage under the company’s plans for up to 18 months after termination. It also includes up to 29 months if the employee is disabled under Social Security standards. 

Premiums can be high, though. That’s why employees can also consider asking their former employers to make those COBRA payments on the employee’s behalf for an agreed-upon time. 

Benefit negotiation is one of the ways employees can get creative beyond just the severance dollar amount.

“The employee should confirm the benefits he or she is already entitled to under applicable employment agreements, compensation plans, and other similar documents,” says Paxton. “Then, the executive should consider the terms that are most important to him or her—both monetary and non-monetary.”   

This is a big decision. Take your time.

Luzio suggests people avoid agreeing to anything on the spot. “Employers are generally required to give workers 21 to 45 days to review a severance offer,” she points out. “You do not have to accept the first offer issued during the same conversation when you’re notified of the layoff.”

So how should outgoing employees handle that 21 to 45 day period? “Share your severance offer with your personal ‘board of directors’ and anyone in your network who might have advice,” says Luzio. “Find someone in the legal field, someone who works in HR, or even someone who has been through a similar experience.”

An article from BetterUp cautions against agreeing to anything with any corporate or financial jargon you don’t understand. It’s always best to consult a professional to ensure you understand everything you’re signing and to clarify any points that might be up for negotiation. 

There are many ways to negotiate severance to better accommodate the departing employee and create a more seamless transition. If employer and employee cannot agree on terms that are reasonable and beneficial to both parties, it might be time for the departing employee to consider the option to completely walk away.