5 Factors That Affect How Much Severance Pay You Get

Severance pay is important for many employees when they are asked to leave their current employer and have to seek work elsewhere. But what factors affect the amount of severance pay you get? Here are five key things that influence severance pay amounts and what they mean for your negotiations.

⦁ The Reason for Layoffs

Companies offer severance packages for two reasons: to bring the employer a benefit or because it's required. If the company must provide severance due to things like union contracts, everyone's chances of higher pay go up. And an employer who is closing a plant, making mass layoffs, or heading off financial problems may also be motivated to increase pay to avoid negative publicity or bad word of mouth.

⦁ The Value of the Employee

Unfortunately, employees who are seen as less of a value to the company will generally receive lower severance pay offers. So if you were a key employee, now is the time to focus on what you did for the company and how you brought financial or other benefits to it. This isn't about sentimentality, though. Your severance pay may represent a fraction of what you did for the company's bottomline.

Even a lower-ranking employee can be valuable though. If you have a large network within a small industry, for instance, you may still be able to provide contacts and avoid reputation damage for your former

employer. These could be valuable commodities during negotiations.

⦁ What You're Willing to Sign Away

If the employer is not legally required to offer severance pay, it usually does so because it wants something in return. So, what does the company want from you and how much of that are you willing to agree to?

If the company wants a noncompete agreement, for example, it will generally start with the most restrictive terms and sweeping time frame. How long are you willing to agree to, over what distance, and within what sectors? The more of your own rights - including things like not suing the company or saying negative things about it - the more you may be offered to compensate.

⦁ Other Benefits in the Package

Salary isn't the only element of a severance package. Don't overlook the value of nonfinancial benefits. Health insurance is a standard component of many severance agreements, and it can be just as valuable (or even more so) than straight salary or bonuses. Help getting a new job could be another benefit that provides more financial return over the long term than an extra week or two of salary.

⦁ Your Knowledge About Severance

Finally, the employee's understanding of how severance pay works plays a big role in negotiations. When presented with a severance pay offer, some employees may not understand that they have the right to ask for more money or for a different set of benefits. You may not understand what leverage you have over the company. Or you may not be a skilled negotiator.

The best way, then, to boost your chances of negotiating more severance pay is to understand your rights and responsibilities as well as what motivates the employer. This is particularly important if the company is counting on its employees' ignorance of the process to make low or bare-bones offers.

Where to Learn More

If you have received or expect to receive a severance pay offer, take the time to meet with an experienced employment attorney in your state as soon as possible. They can help you assess the company's position and motivation, your own leverage and value, and potentially valuable benefits you may want to seek instead of money.

Allen D. Arnold Attorney at Law has assisted Alabama employees with severance issues for more than 15 years. Call today to make an appointment.

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