This as-told-to essay is based on a conversation with Sara Perelli-Minetti, a former HR leader who now runs Hellos & Goodbyes, an executive compensation coaching company. Her previous employment and identity have been confirmed by Business Insider. This story has been edited for length and clarity.
I was laid off from my first job out of college, and I negotiated severance before any of my friends actually knew what it was.
I’ve worked across multiple HR disciplines since then, and I’ve overseen layoffs. I worked in people analytics at Capital One, where I focused on talent management systems, which included analyzing a lot of data on performance management and what happens when people are on a performance improvement plan. I also worked at Wayfair as the global head of HR for customer service and global partners support.
Those roles helped me understand the mechanics of severance and the internal decision-making process as it relates to reductions in force or individual terminations, how those decisions are made, and the risks associated with them. Now I help people negotiate stronger severance packages with my business, Hellos & Goodbyes.
There are five things everyone should know about severance:
The anatomy of a severance package
Typically, the core of a severance package will include weeks of base salary as well as an incentive-based compensation, such as a bonus or commission.
When employers are laying off employees with significant equity compensation, sometimes they’ll give them another quarter’s vest.
There’s also typically some sort of healthcare coverage and career transition service offered. Non-disclosure agreements may have been signed. There is often also a non-disparagement clause, which says employees cannot disparage their former company in any way. Executives often have restrictive covenants, such as non-compete and non-solicitation agreements.
The package should also include your last day on payroll. If you’re still on payroll, you’re still eligible for employee-sponsored healthcare and tax-advantaged savings like your 401(k).
Everything is negotiable — but not for everyone
It’s really difficult to negotiate severance packages in large-scale RIFs, where thousands of people are laid off at the same time. Exceptions actually create risk for the company.
In smaller organizations, smaller RIFs, or in cases of individual terminations, nearly the whole package is negotiable. The question is: Who are they negotiable for?
I have seen the most success for clients who are in multiple protected classes at the VP-plus or director-plus level. Employers also seem more sensitive to age-related claims, based on my experience.
Successful negotiations are amicable
Successful severance negotiations are amicable, collaborative, and professional. I strongly advise against threatening legal action unless you plan to follow through. If you come into a severance negotiation looking for validation of a bad experience, you are not going to be successful, especially if you try to escalate.
It’s important to understand the company’s framework and precedent for severance packages so that you know what would be considered a reasonable increase. For example, does it have a policy around capping severance? Have exceptions been made in the past? Is there a baseline pay amount that every employee receives?
It’s a balance between laying out the context professionally and selectively highlighting some risks. For example, you could mention the protected classes that you’re in, or some of the circumstances leading up to the layoff that weren’t positive. That may include going on medical or maternity leave that year. It’s not illegal, but it’s not great for the company. The optics matter.
It’s also important to look at yourself. Have you been professional and had good performance? Are you someone who is trusted? If you are grounded, professional, and reasonable, the company is much more likely to want to work with you on a mutually acceptable agreement.
Focus on a few areas
You should focus on the three to four parts of the package that are most important to you, and provide a clear rationale for each.
For example, maybe you have a chronic health condition where continuity of care with providers really matters. I often see employers willing to extend healthcare coverage beyond the weeks of severance because the optics are good, and it’s often cheaper per dollar than severance.
I’ve also seen success with clients at the VP-plus level in negotiating the waiver of generic outplacement services and requesting a lump sum toward the career transition service of their choice. That may be between $5,000 and $15,000.
At the most senior level, my clients also often have success negotiating non-competes to make them less restrictive. One of the easiest ways to add value to your severance package is to ask for additional time on payroll.
I often suggest that all employees ask for non-disparagements to be mutual. It’s unlikely that a company will change it as a part of a RIF, but for an individual termination, they’ll often be open to it.
Employers want to feel like they’re doing the right thing. They’re not trying to punish you. People in HR have hearts, too, and they want to feel good about the solution.
You can negotiate severance as part of your job offer
People don’t realize this — and it’s mostly true for employees at the VP level or higher — but it is so much easier to hammer out severance negotiations when people are excited about bringing you on board as an employee than when you’re on your way out the door.
This is typically only possible at the VP-plus level, but for C-suite contracts, it’s quite standard. At the very least, I recommend that director-plus employees ask what the standard severance package would be if their role were eliminated. It’s helpful to understand what you’re walking into, as there truly is no industry standard for severance.
Read the full article here
