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Severance pay and offer negotiation

Severance package

Tell them you have a vacation planned to decompress and start fresh with a clear mind

Severance packages

Last week I wrote about aspects of the job search that recently laid off employees should think about as they look for their next gig. The post was intended to help job seekers overcome stereotypes that will unknowingly be encountered in the job search. Employers, hiring managers and recruiters are all people and we all hold preconceived notions based on past experience. The experience of being laid off from a large brand comes with its share of baggage and last weeks goal was to expose proactive steps for job seekers to overcome stereotypes in the job search.

Since last weeks post, I have received a number of emails asking how to handle the severance packages that were offered, specifically as it relates to accepting job offers with new employers.

The gist of the questions was summed up below per one reader who posted their question in the comments section: 

“I heard that we will lose our severance package if we start a new job before Sept 15. Any advice on how to juggle around that?”

This is a great question and I should have addressed it in the original post. Before I answer the question I thought I would like to provide a high-level summary of the differences between how employers and employees view severance packages as it is relevant to the answer. Per my usual, I want to provide the business logic to the advice. Please keep in mind these are high-level thoughts as they relate to the above question, asked in its entirety. I am not going to go into consideration for signed NDA’s, non-competes or 20-year tenured sr. execs.   

Both sides of the severance package coin

In my experience, there are a couple of ways to look at severance packages. One perspective is how the company looks at severance packages and the other is how employees view severance packages. Not surprisingly, the view for both parties is very different.

Unfortunately, I have been responsible for handling a number of layoffs both domestic and abroad. With this in mind, I feel I have an understanding of how companies view severance packages. I have also been laid off myself, and know how I looked at and felt about the severance package and experience.

Laid Off Employ:

More often than not, employees look at a severance package as something that is “owed” to them when they are laid off.  When I have worked with employees who have been through a layoff, in most cases employees seem to expect that some sort of severance package is deserved, expected, and in some cases required. These are expectations, regardless of the tenure of the employee.  For most employees, severance packages are expected and viewed more as a “settlement” than a severance package.

As employees, we have given our heart and our souls to our employers. We have been loyal to the company in hard times. In some cases, many years of service have been given and it is easy to feel like we are “owed”. When we find ourselves suddenly without a job through no fault of our own with bills to pay, it is easy to look at the severance package more as a settlement for pain and suffering. I have been there. I understand this.      

Insurance settlement vs. severance package

When we are injured in a car accident and it is not our fault, the insurance company will pay for any medical expenses and in addition to this, when it is appropriate the insurance company will pay you for your “pain and suffering”. We may have received $5K to fix our car, $10K to pay our medical bills and in some cases $50K for pain and suffering.

The company’s view a severance package

At a very high level, the company looks at employees as service providers.  As employees, we provide a service and the company pays us for this service.  We work for 2 weeks and then we are paid for 2 weeks of work.  Just like contractors, we work and we are compensated. If we were contractors or vendors providing a service to the company, we wouldn’t ask for a “severance” package when the job was complete.   

To the company, a severance package is there to help a recently laid off employee during the transition period when the employee is looking for the next job and will have no income. In most cases, employers are not required to pay a severance.  Paying a severance may be the “right thing to do”, but is not a requirement.

Remember, layoffs usually happen because the company is in some sort of financial hardship or wants to improve its position. When a company is trying to strengthen its financial position, paying 2 months of salary as a severance for employees who are not providing a service is a tough thing to do.  Do large companies have cash in the bank?  Yes, absolutely?  Does a local companies want to be known as a good employer and have good relations with its customers and the community?  Yes. And does large brands want to give confidence to the remaining employees that they will not be left high and dry if something else were to happen to the company so the remaining employees don’t all go running off?  Probably. 

Do companies that lay off employees look at severance packages as “pain and suffering” payments?  No.  Do they look at them as “loyalty” payments?  No, they do not. At the end of the day, this is a business with a board of directors and stockholders that want results.   

Back to our initial question:

I heard that we will lose our severance package if we start a new job before Sept 15.  Any advice on how to juggle around that?

Layoffs took place the last week of July and it sounds like severance for some readers will be about 6 weeks.  I don’t know the tenure of the employee, but by most standards, this is damned generous.

I know that it sounds like we are leaving a couple of months of pay on the table if we are able to hook up a new gig on August 1, but try not to look at the severance as the company saying “Hey we screwed you, here is a something to ease the pain and make you whole” payment. Look at this STRICTLY as an “I know it isn’t optimum, but this severance package is designed to help tide you over until you find a new job”.  And this is exactly what it is. It isn’t a retirement bonus, it isn’t a bonus for 20 years of service. It is a company trying to do the right thing for the ex-employees, the business, and its stockholders. This is not for “pain and suffering”.

Generally speaking “pain and suffering” payments are designed to help us pay for expenses moving forward like physical therapy or because we lost the use of a limb. These insurance settlements are designed to help make us “whole”. If we are in a car accident and the car needs repairs but we are not injured, the car repairs will be paid for but we won’t receive a settlement. If you talk with people who have received settlements for pain and suffering, I am willing to bet that these victims wish they were not injured and wouldn’t have needed the settlement.  

If it were a company’s intention to pay for pain and suffering, the company would pay out a single lump sum payment and say you can keep the entire payment whether you find a job or not. Sorry this sounds like crap, and I don’t know the exact structure of every individual severance, but it sounds like this is how our reader’s severance is structured. Again, I don’t know the individual situation, but to me, what our reader received sounds fair to the employee and fair to the stockholders. 

Think about it like an ‘unemployment check” from your ex-employer. Instead of the payment equaling a percentage of your pay like the government’s unemployment payment paid out over many months, this is 100% pay over the course of 1.5 months.

Let’s say we are unemployed and collecting government unemployment. If we are collecting the government unemployment and then found a job, the unemployment payments would end. We are not going to try to collect unemployment after we find our next gig. 

How do I juggle around this?

We want to start looking for a job ASAP.  We don’t have to accept the position, but we want to start looking.  Don’t let the severance package stipulations affect your job search. Assuming that an offer isn’t going to come on day 1 – 15 after the layoff (putting the resume together, interviewing, etc take time) just tell your potential hiring manager towards the offer stage (not the first interview) that you have a vacation planned and need to push out your start date. Explain that after you were laid off, you decided you wanted to clear your head and start your new job with a clear mind. Explain that you ALREADY have plans to take your family on vacation, hotels books, flights paid, and GUESS WHEN YOU WILL GET BACK? When your severance payments from your past employer end.

Hopefully, we are going to be able to negotiate an as good or better salary than your prior gig. With this in mind, you are going to want to start before those severance payments end, so just adjust your “pre-planned vacation speech” accordingly. 

If you have a vacation planned with the family to clear your mind after a layoff, or to go back home to spend time with family to re-ground yourself, most employers will be willing to wait an extra week or two for that kind of smart move. It’s in their best interest to hire a relaxed and refreshed employee. I know I don’t want to hire bitter, angry, hasn’t gotten over it, needs to pay the bills ASAP employee.   

If you want your employer to rescind the offer just say, “Hey, I can accept the job, but I want to keep getting my severance payments from my prior employer. Can I start when those payments end in the middle of September?  Actually, I want to collect some government unemployment as well.  Can this job start in 3 months”?  

Again, I am sorry we are in this situation and hopefully the above provides perspective.


nasty: an unreal maneuver of incredible technique, something that is ridiculously good, tricky and manipulative but with a result that can’t help but be admired, a phrase used to describe someone who is good at something. “He has a nasty forkball”.

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