4 Things Employers Should Know When Negotiating Severance

Layoffs are never an easy thing to navigate, both for employees and employers. Huge companies like Microsoft and Google have cut off thousands of employees in the last year. And this is an important diversity topic since layoffs disproportionately impact racial minorities, women and people with disabilities. See article I am quoted in “Tech layoffs disproportionately affect marginalized communities.”

In uncertain economic times, businesses are trying to cut back on spending, while professionals across industries find it more difficult to get good jobs. In the event of a layoff, employers can offer severance pay or severance packages to terminated employees. It’s not a legal requirement to do so, but it can make the separation amicable. These packages usually include a continuation of pay for a period of time after the employee leaves the company, but staff can negotiate for more inclusions, such as the continuation of insurance or health benefits and assistance in finding a new job.

Consistency and communication are key for offboarding.  Your company may already have a set of practices for onboarding employees, but you may have been overlooking your offboarding procedures, which is when employees are transitioned out of the organization. Forbes’ insights into offboarding highlight that this process protects staff and company data and mitigates the risk of wrongful termination lawsuits by properly closing contracts. When coming up with offboarding plans, it is best to plan for severance negotiations. You can set a standard for severance packages for all employees or assess it based on their time spent at the company, their position, and their level of seniority—what is essential is communicating these details to your staff. Properly informing employees that they’ll receive a severance package in your off-boarding plan can minimize legal action and damage your reputation.

Outplacement services can be a benefit in severance packages. Finding a job isn’t easy after a layoff, and regular severance packages or funds don’t provide long-term aid or stability. With a career shift, most professionals and managers would want support for their future roles via connections to opportunities they may not be able to reach independently. However, LHH approaches outplacement with more than just a hand in the job search. Personal career coaching allows outplacement to be individualized and optimized for today’s digital hiring and recruiting methods. This can reduce placement times significantly, and employees can have access to unpublished opportunities globally. Outplacement services can also include helping departing employees transition into a new job through guidance on finding job listings, preparing for interviews, improving their resumes, and more.

Candidates might negotiate severance packages upfront. Even before the initial job offer has been made, some candidates might already start negotiating severance, pay, and benefits. Millennials and Generation Z workers spend less time at their jobs than older generations. A survey from CareerBuilder found that the average length of their stay is two years, nine months, and two years, three months, respectively. It would make sense why they would want to know your company’s severance package before taking the job, and how your answer can impact their chances of accepting the role. Answering honestly is the best response, and you can also assure them that they can further negotiate after accepting the role if that is in your policy.

Millennials and Gen Z-ers are particularly interested in understanding severance packages.

Both parties must be in agreement. Concern for the company’s reputation is a big consideration when negotiating severance, but that does not mean you have to agree with all of the terms and requests of your employee. You might be worried that a ‘no’ could give them a negative perception of the business, but careful discernment and justification for your rejection can open up more room for discussion. Consider also their situation outside of work and how the severance package can be adjusted to provide proper help while being fair and feasible. Knowing your employee well can help bring the negotiation to a mutual agreement and make the split amicable.

If you found this article informative, perhaps our piece titled “Looking for Staff in All the Wrong Places – The Value of Mature Workers. Five Misconceptions” might also be of interest.