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As Layoffs Mount, Severance Packages More Negotiable

5 minute read
Barbara Kiviat

As the economic slump persists, companies are cutting back on the severance packages they offer laid-off workers. At the same time, more employees are asking firms to boost the terms of their parting pay. “In this economy, you really have to think about what you need to stay afloat,” says a Floridian who lost his job running a nonprofit last year. “You have to advocate for yourself.”

The landscape of severance negotiation has changed dramatically since the last recession. In 2001, just 5% of professional workers and 4% of administrative and support staffers negotiated their exit packages, according to a survey by human-resources consultancy Lee Hecht Harrison. In 2008, 31% of professionals and 22% of admins did. Building up the gumption to ask for a better deal is particularly important today: nearly a tenth of firms are planning to change their severance policies by reducing cash payments, according to a March survey by HR firm Hewitt Associates.

So how do you bargain post–pink slip? First, keep your emotions in check. “You’re going to be feeling fear, anger, resentment and anxiety,” says William Ury, co-author of the negotiation classic Getting to Yes. “Those emotions are all extremely natural, but they don’t make for effective negotiations.” Before you say anything, go home and process the news.

Take a few days to put yourself in the right frame of mind. Severance is money a company gives you so that you’ll sign a release promising not to do things like sue or trash-talk the firm in the press. “It’s not love; it’s not a gift–it’s a business transaction,” says Alan Sklover, an employment attorney and author of Fired, Downsized, or Laid Off. If the firm will profit after you’re gone from a big client you landed, mention that. It should be worth something extra.

When that nonprofit executive in Florida–who, like other laid-off workers interviewed for this story, requested that his name not be used because of the confidentiality terms of his severance–went to negotiate his package, he thought not just about what he wanted, but also about what he could offer his employer in return, like being available to answer questions from the people taking over his responsibilities. He also put some things on the table that he didn’t mind not winning–like asking his firm to help finish paying for the car he’d bought for work. The company nixed the car-payments proviso, but he did receive his full salary for three months instead of the 80% pay he’d initially been offered. “Everyone felt like they got something,” he says.

Deciding whom to approach first about your package is key. When a New York City bond trader was laid off last spring, he went to an HR rep he knew from other conversations–and got her to extend his health-care coverage an extra six months by pointing out that he’d quit another job to join the firm less than a year earlier. “Like anything else, this is a relationship, about how much this person is willing to go to bat for you,” he says. Even if you eventually wind up in HR, your boss or another sympathetic higher-up could be a better place to start.

Employers often like to think of severance as a bridge to your next job; putting requests in that light helps. Call a few recruiters and ask how long it will take a person with your experience to land a new gig. Then make the case that your severance should cover the entire period. Even being allowed to use your company e-mail, and perhaps your office, while you job-hunt can help with networking and preserve an aura of employment that makes you more attractive to other firms, says Rusty Rueff, a former senior HR executive at Electronic Arts and PepsiCo. He also suggests asking for a letter of recommendation and making sure you’re listed in your company’s HR system as a person whom the firm would rehire; a potential employer may call and ask. And keeping your employment status as “active”–even if you’re no longer collecting any money or benefits–can help too. Rueff knows of a recently laid-off worker who negotiated that stipulation so he would have an easier time refinancing his mortgage.

Think creatively about the structure of your severance. If you can live on a smaller paycheck each week, ask to stretch out your remaining time on payroll over more weeks. That will keep your benefits, like health care and 401(k) match, going longer.

Throughout the negotiations, make sure to keep a pleasant, professional tone. “If you say you’ve got a lawyer, it’s almost like a threat, and the other party gets defensive,” says a former division head at a pharmaceuticals firm in Pennsylvania. “I was getting advice behind the scenes, but I don’t think they ever knew.”

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