What You Should Look for in a Severance Package
Have you been laid off recently? If so, you're probably familiar with your company's severance package. Severance packages vary considerably from company to company and many depend on what type of role you've been employed in. Negotiating a severance package can be a complicated business but the following information can help you keep in mind what you deserve.
The main component of the severance package is severance pay. This usually ranges from two weeks to six months or more at the rate of your current salary. Unused annual leave is also included in this. Some companies will include sick leave but are not obliged to do so.
Generally your employer will prefer it if you accept a one time payment of your severance pay. However, this may disadvantage you unnecessarily due to the amount of tax you will be forced to pay. If you are owed several months of severance pay, it is more useful for you to negotiate with your employer in order to receive the pay in instalments rather than in one lump sum.
You also need to consider how your severance will affect your health insurance, Employee Savings Plan and/or retirement plan. If you need to continue your health or retirement plan with your current employer while you search for new employment, it is worthwhile requesting regular multiple payments of your severance pay. If you opt for the lump sum, consider how receiving it will impact upon your eligibility for unemployment benefits or a state-funded retirement pension.
Another component of most severance packages is the separation agreement. This is a legally binding document that refers to your severance and usually contains a confidentiality clause. This agreement requires you to affirm that you will not disclose any business information from your previous employer to new or prospective employers.
Finally, your employer may also offer you support services as part of a severance package. These may include access to career counsellors and job placement services, free use of company equipment and property to send resumes to prospective employers and free use of a referral service.
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