7 Tips for Negotiating Severance Up-front
Layoffs weren’t in the headlines a year ago. But in the stumbling economy of 2022, the threat of layoffs has emerged.
So it’s not surprising that some job candidates are planning for worst-case scenarios, just in case. They may not get golden parachutes equal to a CEO’s, but at all levels they can negotiate severance packages when they accept a job offer. “They want to avoid a ‘last one in, first one out’ scenario,” says Bill Sebra, global operating executive in the Recruitment Process Outsourcing and Professional Search practice at Korn Ferry.
But where do you start? What can you reasonably expect to get? For the average employee, severance is typically offered only after a year of service, and usually consists of one or two weeks’ pay per year worked. But Jacob Zabkowicz, vice president and general manager of RPO at Korn Ferry, hears from clients that candidates are asking for up-front severance deals of between two and six months’ salary, depending on the industry, company, and position. He cites high turnover in some industries and continued job shortages in others. The steps in the process include:
Find out if a severance policy exists.
Companies are not required by law to offer severance to at-will employees, so the first thing a job candidate should find out is if the company has a defined severance package. If so, Zabkowicz advises candidates to ask what aspects of the package are negotiable and to make it part of the overall compensation discussion. He says negotiating an overall package of pay, benefits, bonus, severance, and the like is better than trying to negotiate each component piecemeal as issues arise. Employers aren’t likely to be thinking about severance during the offer phase, so using it as a lever could help candidates balance issues like having to relocate for the role, for instance.
Research the risk.
No hiring manager or human resources executive is going to be totally transparent with a job candidate about the inherent risks of taking a new role. “Candidates are fooling themselves if they are relying on employers to offer anything more than reassuring words of comfort,” says David Meintrup, a career coach with Korn Ferry Advance. He advises candidates to network with others in the company, competitors, recruiters, and others not connected to the interview process to source information on risk. Use your network to ask how the company is doing or how solid its business strategy is, says Meintrup.
Assess your level.
The higher up you are on the organizational chart, the more leverage you have in a negotiation, says Meintrup. A vice president or director leaving a $300,000 salary is risking more than a manager, for instance. Moreover, as evidenced during the pandemic, candidates seeking positions leading teams have more wiggle room to negotiate severance up-front. “During COVID, lots of teams disappeared,” says Meintrup, noting that sometimes job security isn’t solely a function of individual performance.
A general rule of thumb is that the fewer qualified candidates there are for a particular role, the more wiggle room a candidate has to prenegotiate severance. Candidates who were recruited for a position also have more leverage than those who applied for it on their own.
Steer away from negative talk.
Focusing too much on macroeconomic issues or on a company’s individual performance or competitive position could give an employer pause in hiring someone, says Sebra. Instead, he advises candidates to frame prenegotiating severance as a means of protecting yourself—from your role being made redundant because of a merger or acquisition, for instance, or from layoffs during another global pandemic like COVID (which is still fresh in leaders’ minds). “Taking a position on these types of events steers the conversation away from normal downsizing or performance issues,” says Sebra.
Think beyond money.
Severance comes in many forms, says Zabkowicz, so don’t get too hung up on the cash component. For instance, some people may see a lump-sum payment as less important than maintaining health insurance (or other defined benefits) until they find a new job. Moreover, Zabkowicz says, while companies may not be willing to negotiate an up-front severance package, they often are willing and able to offer sign-on bonuses. “Job candidates can negotiate to increase the amount of the sign-on bonus,” he says, “or have it paid out over time to essentially serve as an upfront severance payment.” That kind of arrangement provides security—guaranteed money—should the employee be laid off or the company go belly-up.
Offer something in return.
Negotiations are a give-and-take. Companies have historically been unwilling to prenegotiate severance with employees outside of the C-suite; this is partly because they don’t want to set a precedent that could cost them millions of dollars if done at scale. Sebra says candidates should be prepared to offer something in exchange. For instance, many companies require employees to sign a noncompete or nondisclosure agreement—but some do not. Job candidates could volunteer to sign a noncompete or agree not to sue the company in exchange for up-front severance. Other trade-offs they could offer include committing to working full-time in the office or relocating by an agreed-upon date.
Recognize that the offer could disappear.
“Employers are interested in people who see the long-term opportunities for themselves at the new company,” says Sebra. “They are not interested in people who are worried about the worst-case scenario.” Pushing too hard on up-front severance could give a prospective employer second thoughts about hiring you. Meintrup says there is a fine line between asking if severance can be negotiated upfront and telling an employer you can’t take the role unless severance is built in. “There’s always a risk that the relationship could shut down,” he says.
Originally published by KornFerry.