Discussion: January 19, 2010 Ask The Headhunter Newsletter
A reader’s query:
My company has announced a layoff, and it includes me. There has been no mention of severance pay, just “Goodbye and good luck!” Many of us have been here a long time. I want to approach management to ask for some kind of severance package. How should I say it?
How to Say It: What’s a good way to ask for severance if you’re being laid off? Is it even reasonable to ask for it? Do companies owe anyone a severance package?
This is a benefit you can negotiate for, even if they have never offered it in the past.
Initial approach would be to offer to work together to find a fair and reasonable resolution for all parties.
What kind of country is this? Here in Australia I have just been retrenched and got my whole notice period of 4 weeks off with full pay, as well as 6 weeks pay on top because I had been employed more that 2 years and less than 3 years, the outstanding holidays paid out, and got help from an outplacement outfit (paid by the company). Now I have a nice holiday and can look for another job at ease.
Almost all employment in the US is called ‘at-will’, which means the employee can quit at any time and the company can lay off the employee at any time. No notice or severance pay is required by law, but minimum professional standard is two weeks. Some companies give more for long-term employees but it’s strictly voluntary. Some employees have contracts (very rare) specifying severance pay (extremely rare).
Very different from most other countries.
I’d be tempted to think of this as something like negotiating an initial salary. I’d be tempted to put it something like, “Excuse me, I’ve been here for x years and would think some severance would be fair,” and see what happens. If the company is having financial difficulties, that can make it quite a bit harder as it can be easy to fall back on the, “Well, the whole company may just go under here soon so we can’t give you anything special,” for a response.
Canada has “at-will” employment too, fwiw.
Wait a second. What good is asking for severance? I mean, it can’t hurt to ask, but what leverage does the soon-to-be ex-employee have in this discussion?
Just to note, I was recently laid off from a large tech firm, and I actually received a generous package, based on my longevity — and predicated on my agreeing not to bring any legal action against the company. However I didn’t have a hand in negotiating the agreement.
G, When Rainer asked, “What kind of country is this?” I think that it was more rhetorical, a question designed to get the reader to ask him/herself why they would be loyal to any employer in Corporate America since they are clearly not loyal to any of us. He was pointing out the clear superiority of working for a corporation in Australia. Europeans also get much better deals. Most Americans have never been anywhere, so they don’t understand this, and settle way too cheaply. If you are good at what you do, intelligent, reliable, and focused on creating profits for the company, you are a hot commodity. Help is obviously easy to find with double digit unemployment, but really good help, less so. These games are the reason I prefer to work for myself turning a profit instead of earning wages.
Dave asks what leverage the employee has.
If you’re a good employee and you’re being laid off simply due to economic conditions, an employer does not want to burn any bridges. Suppose the economy turns around, and the employer is now in need of workers. If you were shown the door with no severance when you feel it could have been done, would you want to go back unless you really, really had to? Would you, as an employer, want someone back who was only there because he/she just needed to pay the bills?
And would an employer want a very good former employee working for a competitor?
Obviously, this all depends on the situation. And even when no money exists for a severance package, the discussion can be in the best interest of both parties. If I were in this situation and asked for severance, I would feel much better about the company if I was sincerely told that they’d like to, but there’s no money. I’d be much more likely to come back if/when things turned around and they asked me.
Finally, there’s the “leverage” of human decency. The social contract requires that people treat each other with a modicum of respect, and most people feel obligated to provide it. If the company/your supervisor doesn’t, well, you probably shouldn’t be working there in the first place.
@Erika: I agree with you. While some other countries may make life better for workers, I like the US model. It forces workers to negotiate and advocate for themselves. I don’t think you can have extraordinary compensation deals unless there are also really lousy deals out there… So an employee who is able to go argue for a severance package is probably also able to negotiate a good salary package to start with. That’s a valuable skill. A system that ensures “safety” worries me. Maybe I’m a kook.
@Dave: I think you just suggested a strategy for negotiating severance. Sue for wrongful termination, if that’s what you believe is happening. A negotiated severance is one solution for the employer.
Where I work, colleagues who have been laid off recently have been required to sign documents agreeing not to sue, and not to say anything derogatory about the company. Then they receive severance based on the length of employment.
One company I know of requires laid-off employees to sign a document saying they won’t sue and also saying they won’t take any paid employment for a year that uses any technologies they used at the company. Whether ‘any technologies’ includes such things as electricity and the telephone is not specified. If the employee doesn’t sign, no severance pay. If the employee does sign, a modest amount of severance based on length of employment. No negotiation or even clarification of the terms of the agreement permitted.
It amazes me that any individual would sign any such agreement not to sue – it amazes me more that faced with such a decision that an immediate consultation with an attorney would not be in order.
In my opinion any company asking for such a legal release from liability has something to hide and is especially vulnerable to long-standing employees suing the pants off of them.
@Hank: I’ve never seen a severance agreement that did NOT include a release from liability for the employer. It’s pretty clear that no matter what they call it, severance is a pay-off to relieve the company from liability. The liability usually relates to wrongful termination. That is, the employee accepts the termination, then thinks about it and concludes it was done for improper reasons and sues. Thus the severance terms.
I know people who have turned down the severance money in order to retain the right to sue. It’s a choice.
As for having something to hide, I’m afraid that such terms are typical “standard practice” that HR uses whether there’s anything to hid or not.
Big point you make: Prior to signing any severance agreement, SEE AN ATTORNEY FIRST. Most people don’t want to spend the few hundred bucks (or so) that it costs to review the agreement. That’s not smart.
I think Another Steve and G’s posts show what’s wrong with the American system: Employers can do basically whatever they want towards employees.
As a citicen of one of those Nordic countries that some Americans would call socialistic because they don’t know what socialism really is (sorry, couldn’t resist), I can affirm that having rules restricting the actions of the employer and having a union to support me is reassuring, because it makes sure that the employer cannot do whatever they want, and I am free to express my opinions without the fear of getting sacked.
That said, the Nordic system may often go too far; it may inhibit paying for stellar performance, it may protect lousy workers from being fired and it can be too bureaucratic, especially in the public sector. In some organizations, the unions may get so much power that management lives in fear, or unnecessary functions are kept just for fear of strike.
I think the best would be a half-way; rules protecting employees from unfair treatment, unions to assist in such case, but that salaries are negotiated individually and easier to fire people who do not perform.
I agree that the clause in the severance contract about suing is a reasonably fair exchange for severance pay. I think the contract I mentioned that specifies the employee won’t take any paid employment for a year that uses any technologies they used at the company is not a fair exchange since the company expects to pay a few weeks severance for a full year restriction on the employee.
How a company treats its laid-off employees is one of those things you hope to find out by asking around before taking a job. It says a lot about whether it’s the kind of place where decent people would like to work.
I think that Conan O’Brien should write a book about this topic… ;-) For readers outside of North America, Mr. O’Brien is a late night television show host.
He just received $33 million to walk away from his television show, along with $12 million for his staff.
I was laid off from a decent place to work, and was given roughly a week of severance for every year I worked there. (Technically, it appears that I received a week for every year that I worked over 1000 or 1500 hours, with taxes withheld.) If a person were wondering how much to ask, that might be a reasonable figure to try, especially for a worker with over ten years at the company.
Remember, there may be other things you wish to negotiate besides severance, some of which may be easier than others for the company to deliver. Work samples, a placement service, a month or two of health care coverage? And do you know exactly what will happen to your retirement plan? Consider what you really need to get on your feet, and don’t sign HR’s document until you have an agreement in writing that resolves these other questions, too.
And I heartily agree that your main negotiation power is the company’s own reputation and the decency that people owe each other. I don’t suggest threatening to complain all over the internet; quite the contrary. I suggest something along the lines of “you’ve always been fair and treated your employees well, and I think X would be fair…”
@G: You raise an important connection. That between severance and NDA/NCA (non-disclosure and non-compete). I’d never sign a non-compete agreement unless the company agreed to pay me for not competing with them – via an appropriate severance deal. NDA’s are a bit more reasonable, tho’ you should still have a lawyer review before you sign. But NCA’s – those are worth money. While I respect a company’s ownership of its technology, the typical NCA goes too far. Don’t sign unless you get something back to compensate you for the restriction you accept.
Nick, I agree.
Want me to sign a non-disclosure? Make it worth my while.
Want me to sign a non-compete? REALLY make it worth my while.
NDAs can be a term of employment, and failure to sign is a valid execuse to fire you in virtually any state. NCAs are a little harder, especially with regards to at-will states. Many of them have been struct down or rendered unenforceable as an illegal restraint of trade.
However, to get to that point, you’d have to pay a lawyer to fight that battle. Better not to sign it in the first place.