Can Severance Pay Be Negotiated?

"Is this severance offer negotiable?" We hear this question from employees at all levels, and the answer might surprise you. While many people assume severance packages are fixed, LHH’s 9th Severance & Separation Benefits Benchmarks Study shows there's often more flexibility than you might think.

Here's what we're seeing in today's market: severance practices aren't written in stone. Many organizations are open to discussion about various elements of their severance packages.

Source: LHH's Severance & Separation Benefits 2024 Benchmarks Study

When asked whether severance pay can be negotiated, 80% of respondents said yes, with only 20% saying no.

While companies may be willing to negotiate the total dollar amount of severance packages in some cases, most negotiation typically happens around the edges - focusing on specific benefits, terms, and conditions rather than the core financial compensation.

Key Elements Open for Discussion

• Bonus - The prorated annual bonus is often on the table. For employees who've contributed significantly during their time but are leaving before the standard bonus payout date, this can be an important point of negotiation.


• Timing - Timing of severance payments also comes up frequently in negotiations. This isn't just about when you receive the money - it can have significant tax implications depending on whether payments cross calendar years.


• Medical Benefits - Healthcare is another crucial area. With medical coverage being such a vital concern, many employees successfully negotiate extensions to their health benefits beyond the standard package.


• Tech - In today's remote work environment, computer hardware retention has become an increasingly common negotiation point. Some organizations are willing to let departing employees keep their work devices, particularly when it makes sense for both parties.


• Referrals - Professional recommendations and referrals can also be part of the conversation. Many employees negotiate specific terms about how their departure will be characterized and what kind of references will be provided.


• Non-Competes - Non-compete clauses represent another significant area for potential negotiation. These discussions often focus on the scope and duration of any restrictions on future employment. It's a delicate balance between protecting the company's interests and ensuring you have reasonable opportunities for future work.

Why Companies Are Flexible with Severance Packages

Different employees have different needs and circumstances. Flexibility in negotiation actually serves both parties - it helps companies maintain positive relationships with departing employees while ensuring their employer brand remains strong.

Organizations recognize that one size doesn't fit all when it comes to severance. As noted by the Association of Legal Administrators, a company's ability to attract new talent is influenced by how they treat departing employees, which is why many organizations prioritize fair and thoughtful severance negotiations.

Summary

Severance pay can often be negotiated, with many companies offering flexibility on specific elements such as bonuses, medical benefits, timing, and non-compete clauses. While the core financial compensation may be less negotiable, there are several areas where employees can work with their employer to reach a more favorable agreement. This flexibility benefits both the employee, who can secure better terms for their transition, and the company, which maintains positive relationships and strengthens its employer brand.

If you’re interested in learning more about how your severance policies compare to your peers, get in touch!