Laid-Off Employees Urged To Negotiate Severance Packages

By Staff
August 14, 2009

Along with slashing jobs, salaries and benefits, companies are reacting to the economic downturn by reducing severance packages. Consequently, experts are cautioning laid-off workers to negotiate carefully.

"Companies are becoming far less generous with their severance," noted Maury Hanigan, founder of Layoff Coach, who was quoted by USA Today. "They are finding reasons to reduce severance or make it harder to qualify."

According to a March survey conducted by consulting firm Hewitt Associates, one in five companies plans to make changes to their severance programs. Of those, 43 percent plan to reduce cash payments, while 21 percent expect to cut back on other severance benefits.

The reason, explain experts, is because companies are trying to cut costs. "There is less money on the table," explained Wendi Lazar, an employment lawyer at Outten & Golden in New York, who was quoted in The Wall Street Journal, "and people are essentially doing the least that they have to do in terms of taking care of exiting employees."

According to Ed Rataj, managing director of compensation consulting at CBIZ Human Capital Services, medical benefits are likely to be cut first. Some companies are either sharing the cost with former employees or requiring them to pay for their entire health benefits.

Lori Wisper, a senior consultant at Hewitt, noted that some employers are revising how they calculate severance payments. For example, two weeks of pay for every year of service may be reduced to one week of pay per year.

Rataj noted that one benefit that seems to be remaining is outplacement services, which can provide resume preparation and administrative assistance. These perks "provide goodwill among employees," Rataj said in the Journal. "It can create a good public image at a pretty low cost."

Although generally severance is not negotiable, laid-off employees are urged to insist on receiving unused vacation pay and pending year-end bonuses. Hanigan also suggests negotiating to keep laptops or cell phones, and knows of at least one person who asked to keep a company car and received it.

In addition, laid-off employees should ask someone--preferably a lawyer--to look over the termination agreement before signing. "Having a second set of eyes look at the documents is usually a good thing," said Hanigan.

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