Signing a severance package often takes place during one of the most stressful times of your life. When you lose a job, this package may seem like a needed lifeline, but there are a lot of things you need to consider, too.
Severance packages include pay and non-pay benefits when you are involuntarily separated from or laid off from your employment. Neither federal nor state law mandates severance, but many companies offer it as a means of preventing employment-related lawsuits.
When you understand more of what your package covers, you’ll be in a better position to negotiate. Lawyers who handle employment law are in the best position to help with these cases.
What Information Should Be in a Severance Package?
Your package should include important financial information which includes:
- How much you’ll be paid, and how it will be paid;
- Compensation for unused paid time off such as vacation and sick time;
- Continuation of employee benefits such as health insurance, 401k, and other like benefits;
- Outplacement services including resume assistance.
Severance agreements also contain many provisions which do not immediately impact the money that you receive, but are very important for you to fully understand. For example, these agreements contain waiver clauses which provide that you agree to forfeit all your employment-related claims and agree never to sue the employer for anything connected with your employment.
What Should You Know About Pay Calculation Before Signing a Severance Package?
Understanding how the severance pay is calculated and if anything needs to be negotiated before signing a severance package is always a good idea. Your regular pay is usually the starting point for calculating your severance amount.
Hourly employees, for example, usually receive severance pay which is their weekly pay times the number of years worked with the company. Salaried pay is often calculated using a similar formula. The employer should share with you the formula the employer is using for all employees impacted in the same layoff as you.
Sometimes companies will continue your usual pay rate for a certain time period after you leave the company. This pay might take place over time or be paid as part of a lump sum. Often, employees can choose a lump sum or payment over time. However, employees often forfeit benefits such as health insurance if they choose a lump sum.
Can Severance Packages Be Negotiated?
Negotiating for a more suitable agreement is likely possible. You should give yourself time to prepare, as well as consider working with an employment attorney if you want to maximize your severance pay.
Some considerations to keep in mind if you opt to negotiate:
- How long have you worked for the company?
- How long will it take you to find another job?
- Was your position being terminated permanently?
- What value have you brought to the company?
You’ll also need to consider whether your termination has anything to do with reasons protected by law, such as:
- Sexual orientation
What If my Severance Does Not Include Health Insurance?
COBRA benefits allow former employees to keep using their insurance after a job is terminated. Companies with at least 20 employees are generally required to offer this benefit.
You’ll be required to pay the premium amount that your employer paid for this coverage, which is sometimes less than buying a new policy. COBRA coverage lasts for 18 months unless you get another job that offers health benefits.
Understanding your rights as an employee terminated from a job is important before agreeing to accept severance pay. Rowdy Meeks Legal Group LLC has helped clients with employment cases to get the benefits that they need following a job termination.
Contact us today about any questions or concerns that you have about signing a severance package.