Should You Negotiate a Severance Agreement?


when to ask for severanceThe mere thought of receiving severance sends shivers up many people’s spines.

Severance implies termination. Out of work.  No job. And worse—lost wages. But severance also protects both employees and the employer.

In today’s rapidly changing business environment, where companies pursue growth and increase shareholder value through mergers, acquisitions and divestitures, employees continually face the risk of job loss. If an employee is terminated without cause, that worker is eligible for—and should request—severance.

Severance policies protect companies by ensuring that employees make the right business decisions—regardless of whether the decisions result in job loss.

To effectively grow business, companies need to execute strategies that benefit the company, brand, shareholders/stakeholders and key investors, so they institute severance policies to ensure that individuals act in good faith.

When to Ask for Severance

There are three situations when employees can request severance: Upon hire, when you’re asked to sign restrictive clauses, and upon termination.

1. Upon Hire

Ideally, severance agreements should be detailed in the employment agreement (or offer letter) that’s executed upon hire. At a senior level, severance provisions are a normal part of business and are considered a best practice, but severance provisions are less commonly offered in employment letters below that level.

If a potential employer gives you an offer letter that does not include a severance provision, ask for one! You can inquire about how the company handles “termination without cause,” which allows an employer to eliminate a person/position for operational or budgetary reasons—in other words, any reason other than performance.

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The employer may respond by including a clause in the new hire letter or explaining the company’s severance/termination policies. Bottom line: It doesn’t hurt to ask.