Understanding the benefits available in a severance package is essential to protecting yourself and your family. Have the conversation now, so you don’t regret it later. Focus on the end as much as on the beginning.
Think of this scenario: After weeks of preparation, four rounds of interviews, and proving your worth, you’ve got the job and achieved your goal of becoming an executive or VP. Now’s the time for negotiations regarding your salary, stock options, benefits, and more. In the excitement and anticipation of starting a new job, you’re probably not thinking about what happens when you leave the company. But overlooking this important aspect of the employment relationship can have significant negative consequences.
How to start with the end in mind:
The What: Unless you plan to remain with your new organization for the rest of your career, eventually you’re going to leave, and understanding what will happen when you do is vitally important to making the right employment decisions. While you are still in the courting phase of the relationship, don’t hesitate to discuss all of your employment benefits, including your severance package. In the beginning, this is a conversation. In the end, it may become a negotiation with significant repercussions. So having the conversation early on is much more likely to produce a positive outcome for you, your organization, and your reputation.
How do you have the conversation? Here are some suggested best practices for introducing the separation topic early in your employment discussions.
The When: The earlier you raise the topic of severance practices and packages the better.
Typically, you’ll only have three chances:
- In the beginning, when you’re being hired or promoted into a leadership position.
- When you are asked to sign a restrictive covenant (e.g., a non-compete agreement).
- At the end, when you are leaving the organization.
The How: Each one of these three phases of the employment relationship presents a different and unique opportunity to have a conversation regarding the terms of your separation.
The best practice for senior executives is to discuss the severance package upfront as part of the hiring process. When negotiating your offer, bring up the severance topic in the context of overall benefits, keeping in mind that any reputable employer understands that separation benefits are just as important as health insurance, retirement planning, Paid Time Off, etc. In this initial phase, it is easier to discuss all of these employment issues together.
Another opportune moment to broach the topic of severance is when and if you are asked to sign some form of restrictive covenant, such as a non-competition agreement. These agreements can have a dramatic effect on you, your family, and your career. Asking for additional details regarding the other terms of your separation is imminently reasonable. As a side note, remember that to be enforceable, covenants not to compete must be reasonable, both regarding their duration and their geographical scope.
Finally, when and if you leave the company through no fault of your own, try to facilitate a healthy departure. Doing so will often generate goodwill and is more likely to produce positive discussions regarding the terms of your separation.
If you’re uncomfortable raising the topic of severance, talk to others
Having the severance conversation with your potential employer may be difficult, but it is vitally important. In preparation for the conversation, do your research. Determine what is typical for your industry and your role level. Seek out former executives and employees and ask about how the organization deals with severance and termination. You can also ask leaders of other companies how they’ve negotiated severance. But be careful not to say anything that could be interpreted negatively by your potential employer if they learn about your discussions.
Carefully review your employment offer
When you receive a formal offer letter, check the details for a severance package. If your offer doesn’t contain a severance package, ask for one. And remember to document everything that you have negotiated and obtain signed, dated, details of any discussions or agreements.
Negotiate in the right way
Regardless of when you negotiate your severance package (beginning, middle, or end) it’s important that you do it the right way:
- Always stay calm and collected. Remember that it’s not personal and that if you broach the topic in a positive fashion, you are more likely to receive a positive response.
- Reassure your potential employer this is a contingency plan and nothing more. A reputable employer is likely to respect the fact that you are looking out for yourself and your family.
Most companies understand that negotiating the terms of your employment (including the nuances of your severance package) is vitally important and will gladly accept discussing these issues with you early on. Most employers will also encourage you to get an employment attorney or other professional to assist you in evaluating your offer letter, executive compensation package, and/or severance agreement.
Bottom line- Never be afraid to negotiate the terms of your severance package. Have the conversation early, get advice from others on how to approach it, and, if necessary, retain a professional to assist you in reviewing the package. After all, it’s far better to have a discussion now and get a severance package in place, so you don’t have to worry negotiating for it later!
Matt Gordon is the owner of Matthew Dallas Gordon, LLC, a five lawyer civil litigation law firm located at 836 Farmington Ave, Suite 221A in West Hartford, Connecticut. Contact information: 860-523-0471 or firstname.lastname@example.org