Being laid off is never easy, but knowing how to negotiate severance pay can help you walk away on fair terms. Knowing what’s realistic to expect and how to negotiate can help you secure a fair deal as you move into the next chapter of your career.
While not every employer is legally required to offer a severance package, many do so to facilitate smooth transitions and prevent disputes.
What Severance Usually Includes
A standard severance package typically offers one to two weeks of pay for each year of service, though this can vary widely by company and industry. Some packages also include continuation of health benefits for a limited period, payout of unused vacation time, or access to job placement assistance.
Severance is not guaranteed by law in most cases, so any offer is subject to negotiation. Understanding what’s commonly included can help you evaluate whether what you’re being offered is fair or worth negotiating.
See Your Rights When a Company Closes and Owes You Money to learn what protections you have
Benefits Beyond Pay
While money is essential, don’t overlook the value of other benefits. Continued health insurance coverage under COBRA, even temporarily, can save you thousands. Some companies provide extended access to employee assistance programs, outplacement services, or career coaching.
If you’re in a specialized field, negotiating for professional references, portfolio rights, or the ability to retain company equipment (such as a laptop) may also help you transition more smoothly into your next role.
When and How to Negotiate
Timing matters when it comes to severance. Employers often present agreements quickly, hoping you’ll sign without review. Resist the urge to rush. Request time to consider the offer, and if necessary, consult an employment lawyer to review the terms of the offer.
During negotiations, be respectful yet clear about what matters most to you. Whether it’s additional weeks of pay, extended benefits, or a neutral reference letter, frame your requests in a way that highlights fairness and practicality. Employers are more likely to agree when they see your proposals as reasonable.
Read Understanding Noncompete Agreements Before Signing to learn how to spot restrictive clauses.
Watch Out for Restrictive Clauses
Severance agreements often include non-compete or non-disparagement clauses that can limit your future opportunities. Read the fine print carefully. While severance pay may seem like a lifeline, agreeing to restrictions that harm your long-term career could cost you more in the end.
If you’re unsure whether a clause is enforceable or if it seems too broad, get legal advice before signing. A lawyer can help you negotiate adjustments or advise you if it’s better to walk away.
Consider Taxes and Timing
Another key element of severance packages is how payments are structured and taxed. A lump-sum payout may feel appealing, but it could place you in a higher tax bracket for the year, reducing the net benefit. Alternatively, some employers offer severance in installments, which can help spread out the tax impact and provide ongoing financial stability.
You’ll also want to think about timing in relation to unemployment benefits. In some states, receiving severance pay can delay or reduce an individual’s eligibility for unemployment benefits. Understanding how your severance benefits interact with these programs ensures you make the most of every available resource.
Check out What to Do If You’re Wrongfully Fired to understand your rights.
The Bottom Line
Severance agreements can feel overwhelming in the moment, but taking the time to review the details carefully makes all the difference. Focus on both immediate financial needs and long-term career goals when deciding whether to accept or negotiate.
Remember, severance is often more flexible than it seems. By asking thoughtful questions, considering taxes and benefits, and paying attention to restrictive clauses, you give yourself the best chance of leaving on fair and secure terms. Protecting your future starts with understanding what’s realistic and advocating for yourself.
