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Get the Upper Hand in a Severance Package

It's every employee's worst nightmare: The call from human resources, the sit-down with the boss and that HR rep from corporate, and the scripted declaration of "It's not you, it's the economy."

Indeed, workers across the U.S. increasingly are taking the fall as companies reel from the one-two punch of fewer customers and a tight credit market. In January, nearly 240,000 workers received pink slips, according to the U.S. Bureau of Labor Statistics' mass layoff data, which tracks instances in which companies lay off 50 or more employees. The January numbers -- the most recent available -- represent a nearly 60% increase from the year-ago period.

And while any employee would like to avoid getting laid off, it's rarely something you can control. But what you can control is how you leave a company -- and, most importantly, the size of your severance package. Fact is, there's often room to negotiate the terms of a severance package, and employees need to know what to ask for -- and how to ask for it -- to get the best deal. "The severance offer is just that: an offer," says Kirk Nemer, president of Denver-based Career Protection, a national firm that helps employees negotiate severance packages. "That's the leverage employees have to negotiate their own terms."

The first step is to understand why companies offer severance packages even though they aren't required by law to do so. (Hint: It's not just to be nice.) When you sign on the dotted line to accept a severance package, you waive your right to bring employment-related claims such as age discrimination against the company. In that way, offering each employee extra pay and benefits can be a fiscally prudent move, heading off potentially costly legal trouble down the road. "Companies offer severances to smooth the transition when employees are laid off," says Robert Ottinger of The Ottinger Firm, a New York-based employment law firm. "If someone has a potential employment claim, that creates a very un-smooth transition for the company."
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