WASHINGTON — As the national unemployment rate nears 10 percent, many Americans are doing something they had never imagined they would do: negotiate a severance package.
It’s a formidable task, more so now that employers, battered by the economic downturn, are offering smaller payouts when they let go of employees. Therefore, experts suggest doing research and soul-searching before walking into negotiations: Figure out what others have received and what you’d like to get.
“There’s a lot at stake here, and you really can make a difference in what you walk away with if you prepare,” said Maury Hanigan, president of Layoff Coach.
What are your rights?
Many American workers have a misperception about what their employers are supposed to grant them when they are laid off. There is no law requiring employers to offer severance packages.
Many top executives negotiate for severance agreements, sometimes known as golden parachutes, in their employment contracts. Average workers, however, don’t have that specific an agreement.
Still, it’s important to review your initial letter of employment and your union contract, if you’re covered by one, and to study the employee handbook. Look for anything that suggests a contract that guarantees severance or a company severance plan.
“In the absence of those two things, there really is no right to severance,” said Evan Fray-Witzer, a lawyer at Ciampa Fray-Witzer in Boston. “This is not something that is a guaranteed right. This is something you ask for.”
If you think you’ve been harassed, discriminated against or retaliated against, you might have a legal claim to a payout. In that case, check with a lawyer.
Art of negotiating
Losing a job is traumatic. But don’t make that obvious when you go into negotiations. “Try to maintain your composure, and don’t act emotionally,” said Jeff Gordon, a professional negotiator in Raleigh, N.C. “Don’t key someone’s car outside in the parking lot to feel like you got revenge. That really serves to diminish your own position.”
How do you put yourself in the best position? Try these steps:
Find out whether your company has given severance packages to others. If so, talk to your former colleagues to learn the details.
What does the company want from you? Maybe you have a contact list it could use. Or maybe your boss needs you to train a replacement or complete a project.
Also, if you’ve been with the company for several years and performed your duties well, point it out. But “you have to have facts to back it up,” said Emory Mulling, chairman of Mulling Corp., a placement and career-transition coaching company in Atlanta.
Prepare a prioritized list of what you plan to request. Also, consider to whom you should make your argument. Maybe that’s your boss. Or maybe it’s a human resources official.
Showing up at the negotiating table with a lawyer will set a hostile tone, experts said. Your company will then bring in its lawyer. “It gets very serious, very quickly,” Mulling said. “You mention an attorney only as the last resort if you feel you have extenuating circumstances.”
Some employers will ask you to sign a non-compete clause, which would forbid you to work for a competitor. In some states, courts tend to rule against such clauses. Your employer could also ask you to sign a non-solicitation clause, which would bar you from wooing away anyone from your former company if you start a business. A non-disclosure clause would keep you from sharing confidential company information. Make sure you understand your rights. You might want to have an employment lawyer review any of these clauses in your severance agreement.
Take the paperwork home. Have a friend or spouse look it over. If you don’t understand it, have a lawyer study it. “You don’t want to knee-jerk sign it because you are an emotional wreck,” Gordon said.
What to ask for?
The answer is anything. You’ve lost your job; what more do you have to lose? But be realistic. Don’t expect to get everything you want.
You will probably be most concerned about your salary and benefits. According to Hewitt Associates’ review of 228 large U.S. companies, 51 percent offered a standard one to two weeks’ pay for each year of employment. Thirty-three percent determined severance pay using a formula that combined years of service with salary or job level.
Most companies provided at least one benefit, such as health-care coverage, retirement benefits or life insurance. Thirty percent provided full health-care coverage during the severance period.
But think beyond the numbers. “Most people look at the number of weeks of severance and their benefits as the only pieces of the severance, and in truth those pieces are often the least negotiable,” Hanigan said. “There’s a whole world of things they might want to ask for.”
Here are a few:
Home office furniture or equipment.
The company car.
A prorated bonus if you were laid off before the end of the year.
Health-club membership.
Employee discounts for the cellphone plan.
Use of a day-care facility.
More important, request things that will help you land your next job. Ask for a positive recommendation. Request outplacement services, such as training or resume writing.
“Anything you can negotiate to help you get employed faster becomes really important,” Hanigan said.
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