What to Know About Severance Packages

Unfortunately, layoffs can occur at any time for many reasons. Due to economic and health conditions, employees in 2020 and 2021 are more likely to see layoffs than they have been for many years.

When being laid off, many workers wonder if they will receive severance packages to help compensate them. Like many aspects of company layoffs, the answer depends on your state, your situation, and your company. Discover a few answers to the most common questions employees have about a severance offer.

Am I Guaranteed a Severance Package?

Sadly, most employees are not guaranteed a severance package. Federal law doesn't generally require payment beyond your worked hours. Exceptions occur in certain situations, though. Your state may have rules regarding severance. In addition, union agreements or written company policies may mandate it. And if you're part of a mass layoff with no warning, the company may have to offer compensation. 

Beyond these mandated severance packages, you are also more likely to receive an offer if you had a management or supervisory position. And if the company will be better off after these job cuts, they are in a better position to offer financial compensation.

What's Offered In a Severance Package?

Severance packages vary widely based on the employee and what type of layoff occurs. But they do have a number of common elements. First, you would be offered additional pay of some amount. One typical calculation is a certain number of weeks' pay for each year of employment. However, company policy may specify how severance pay is handled across the board.

Another common feature is the extension of health insurance. Employers must generally extend COBRA health insurance benefits to terminated employees, so there will be instructions and amounts to buy this. If the company agrees to subsidize insurance for a period of time, this will be detailed as well. 

Finally, some severance offers include other financial or non-financial assistance for the laid-off employee. This may include retraining opportunities or outplacement services to help you find a job. The company may extend other benefits, like life insurance, for a time. And if you have a pension, employer-sponsored retirement plan, or stock purchase plan, the document would discuss what happens to these. 

Why Does a Company Offer Severance Packages?

Both the employer and employee get something out of a severance package. Employees usually receive financial benefits and assistance moving on or finding new employment. The employer demonstrates their commitment to employees even when a layoff was unavoidable. They may also ask you to sign a general release of all potential claims (i.e. you cannot bring a lawsuit even if you learn about illegal behavior after you sign) confidentiality agreement or a non-compete clause that protects their interests in return for compensation.

Can You Negotiate a Severance Package?

It is possible to negotiate your severance offer, but that often depends on the facts leading up to your layoff. Some companies have written policies, though, that make negotiating more difficult. You're more likely to have success negotiating if your role in the company was valuable or sensitive or if company policies on the matter are nonexistent or not applied impartially.

For the best analysis of your severance package, you should consider retaining an employment attorney. They will aid you in finding your priorities — such as getting paid health insurance — and focusing negotiations on these. Whether you negotiate for a lot or a little, have a lawyer look over the agreement before you sign to ensure you know exactly what you're agreeing to.  Sometimes your company might even pay the consultation fee. 

Where Can You Learn More?

If you believe you will get a severance offer or that you may have a right to one, your first stop should be to meet with a qualified employment attorney in your state.  Allen D. Arnold Attorney at Law  can help. We have extensive experience with severance agreements of all types. Call today to make an appointment for a consultation.

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