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Many employees, including six-figure managers and executives complain that they feel powerless in negotiating with their employers. This is true whether the topic of negotiation is a raise, a promotion - or the last important interaction between employer and employee, the severance discussion.
Here are five tips for cutting the best severance deal for you, despite the recession: 1. the most important thing for employees at all levels to understand is all severance packages are not created equal. Even if your company has a policy that says every employee at a certain level, with certain tenure, receives X weeks or X months of salary as severance, decisions ultimately are made on an individual basis. You can always negotiate a better deal.
2. Know your leverage. Remember that Leverage is the currency you have to trade with your employer in severance negotiations, so valuing it properly in advance is critical.(1) the employer wants to protect against you criticizing the company after you're gone;(2) the employer may need you for something later, such as testifying in a lawsuit or providing information to a replacement; or (3) the employer wants to protect against being sued, particularly if you're an older worker, a woman, or in a racial minority.
3. Severance is the toughest kind of negotiation - because it's not just business, it's personal. The key is to bring up the leverage you have without sounding threatening. For example, if you say, "I think this could be age discrimination," the negotiations will immediately be over. But if you say, "Are you getting rid of me because you think I'm over the hill?" it raises the same issue, but in a way that isn't an accusation. It can even induce sympathy from your boss.
4. Once you've settled on, say, six months of salary as your severance, the negotiations don't stop there. For example, many employers offer outplacement services. If you are planning to start your own business or already have a new job lined up, you might ask your employer to convert this benefit to cash. On the other hand, if you are interested in going back to school, you might ask the employer to convert part of your cash payment to a tuition benefit, which will reduce the amount of taxes you have to pay on your severance check. Be creative and look at whether you'd be better off converting some of your non-cash severance benefits to cash, or vice versa.
5. 401(k) vesting is negotiable. At most companies, you have to work there for a certain period of time before your employer's 401(k) matching contribution vests - meaning you can take it with you. Employees have successfully argued in lawsuits that they were fired so their employer wouldn't have to vest them. You can use this fact as leverage in your severance discussions. I have a friend who was three months away from his 401(k) vesting when he was laid off. In his severance negotiations, he asked if he could be kept officially on the payroll until his vesting date. The employer agreed - resulting in an additional $20,000 in his 401(k) account that would have gone away if he hadn't asked.
Here are five tips for cutting the best severance deal for you, despite the recession: 1. the most important thing for employees at all levels to understand is all severance packages are not created equal. Even if your company has a policy that says every employee at a certain level, with certain tenure, receives X weeks or X months of salary as severance, decisions ultimately are made on an individual basis. You can always negotiate a better deal.
2. Know your leverage. Remember that Leverage is the currency you have to trade with your employer in severance negotiations, so valuing it properly in advance is critical.(1) the employer wants to protect against you criticizing the company after you're gone;(2) the employer may need you for something later, such as testifying in a lawsuit or providing information to a replacement; or (3) the employer wants to protect against being sued, particularly if you're an older worker, a woman, or in a racial minority.
3. Severance is the toughest kind of negotiation - because it's not just business, it's personal. The key is to bring up the leverage you have without sounding threatening. For example, if you say, "I think this could be age discrimination," the negotiations will immediately be over. But if you say, "Are you getting rid of me because you think I'm over the hill?" it raises the same issue, but in a way that isn't an accusation. It can even induce sympathy from your boss.
4. Once you've settled on, say, six months of salary as your severance, the negotiations don't stop there. For example, many employers offer outplacement services. If you are planning to start your own business or already have a new job lined up, you might ask your employer to convert this benefit to cash. On the other hand, if you are interested in going back to school, you might ask the employer to convert part of your cash payment to a tuition benefit, which will reduce the amount of taxes you have to pay on your severance check. Be creative and look at whether you'd be better off converting some of your non-cash severance benefits to cash, or vice versa.
5. 401(k) vesting is negotiable. At most companies, you have to work there for a certain period of time before your employer's 401(k) matching contribution vests - meaning you can take it with you. Employees have successfully argued in lawsuits that they were fired so their employer wouldn't have to vest them. You can use this fact as leverage in your severance discussions. I have a friend who was three months away from his 401(k) vesting when he was laid off. In his severance negotiations, he asked if he could be kept officially on the payroll until his vesting date. The employer agreed - resulting in an additional $20,000 in his 401(k) account that would have gone away if he hadn't asked.
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