Get the Upper Hand in a Severance Package

If you're laid off, you actually have some control of the situation. Here's what to do.
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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."

So if you find yourself facing the firing squad, how can you make sure to leave with the best possible package?

For starters, don't sign anything. HR reps often will present employees with documents to sign when they're laid off. Instead of agreeing on the spot, take the document home and mull it over. Chances are you'll be less emotional and you'll have a clearer picture of what the severance agreement offers.

Take a close look at the severance agreement. The key piece of these agreements is the money -- how much you get and for how long. You may be able to negotiate more money, especially if you're a long-time employee and can demonstrate your loyalty to the company. "Every case is different," says Ottinger. "You just need to find the pressure points that work."

Because many companies laying off workers are strapped for cash, you may have difficulty negotiating more money. But that doesn't mean you have to take what your employer is giving: Consider asking for an extension of your health-care coverage, or ask your employer to designate a person at the company who will field inquiries from potential employers on your behalf. Or ask for access to an outplacement firm for resume and interview assistance.

Meanwhile, getting laid off doesn't necessarily mean leaving the company. Ottinger says some firms may be willing to hire laid-off employees on a contract basis. Ask your employer if this is an option.

Throughout the layoff process, be sure to adopt the right attitude. That means curbing the impulse to point fingers or make emotional comments. It also means listening and calmly asking why you were chosen to be laid off. Human-resources professionals are well-trained to offer plain-vanilla reasons, but Ottinger says he's represented many clients who were told they were being laid off for being too old or too sick, both of which amount to employment discrimination.

If you suspect you're a victim of discrimination, contact a lawyer who specializes in employment law. Otherwise, Nemer of Career Protection suggests keeping lawyers out of the equation. If you don't, he says, the company will likely drag its legal counsel into the discussion, complicating the entire severance process. "The best severance deals come from your friendly human-resources department," he says.