Things You Should Consider When Receiving a Severance Package:Not doing these can cost you a fortune
Updated: Feb 2
Receiving a severance package for any reason can be an emotional and confusing experience. Learn more about what you should consider before signing anything...
It is a term most people have heard; however, taking a severance package is not an experience everyone will have thought through during his or her professional life.
Severance packages are offered by employers for a variety of reasons, and if you have received one, you are likely aware of the stress that can accompany it.
Whether you have quit, been laid off, terminated, or are being offered severance as part of a contractual obligation, there are a few things you should consider before accepting or agreeing to anything!
Of course, being offered a severance deal is often a better alternative than not receiving anything at all upon taking your leave from your job. You should not feel obligated to accept the first offer without thoroughly reviewing and understanding the terms. In my experience, companies do not generally start with their ‘best and final’ offer.
Aside from conducting a thorough inspection of the agreement and any fine print, you should also obtain the services of an experienced employment attorney adept at negotiating, to ensure you don’t miss any opportunities to improve your takeaway--financially or otherwise.
Three Important Considerations
In addition to discussing any potential claims you may have against your employer with an experienced employment attorney, you should also consider the following:
The Financial Impact
It is of the utmost importance that you take into account the financial impact that accepting a severance package will have on your life, overall. What does the bridge to the next chapter of your professional look like?
It is crucial to keep in mind that any lump sum payments you receive are taxable and you would need to set aside a sizable portion upon receipt to avoid issues when filing your taxes.
You will also want to consider how it may affect your employment benefits. You need to know whether you should switch over to a spouse’s or partner’s plan if applicable, and if not, how your coverage will be impacted.
If you are planning to take advantage of any unemployment benefits, you must also determine how that may be affected by accepting a sum of money through your severance package. In some cases, you may not be eligible for both unemployment and severance.
It is a good idea to speak with legal counsel and an accountant to determine how best to proceed with your severance package in terms of your financial security going forward.
Can (and Should) You Negotiate?
Whether or not you choose to enter into negotiations on your severance deal will likely depend on a variety of factors that you should raise and discuss with an experienced employment attorney.
If you are not satisfied with the package your employer has presented, you may wish to build a case that denotes why you feel entitled to the changes you are requesting and outlining exactly what you want.
While in some situations, negotiations may be made for larger pay outs, other individuals may want to focus on the removal of restrictive provisions, extending benefits coverage, or including access to their existing clients and resources.
Be aware of what you stand to lose (or gain) through the signing of your severance package and be reasonable when presenting your counter-offer. Be sure to highlight your contributions to the company and why they merit the requests you have made.
Take Your Time
Finally, take your time. Do not allow your employer to pressure you into signing something without first taking the time you need to fully read through and understand what the agreement entails.
There is often a lot of pressure placed on employees to sign immediately, whether they were laid off, terminated, or are leaving the company for any other number of reasons.
Make sure you know your rights and allow yourself the opportunity to consult with an employment attorney who can walk you through the offer and assess any opportunities to successfully negotiate.
You want to be careful not to sign anything that will eliminate your rights going forward, limit future job prospects, or allow the company to avoid legal action for any wrongful dismissal claims you may legitimately hold.
While the prospect of a severance package can evoke many emotions, both positive and negative, it is imperative that you maintain a level-head when entering into potential negotiations and don’t sign anything without first knowing all of the potential consequences.
I can help you navigate the complexities of a severance package and make sure you walk away with the best possible outcome. Contact me to book a consultation today!