Losing your job is stressful, but a severance package may be more negotiable than you think. Here are five areas to review before accepting an offer.
Start by asking for additional weeks of severance pay. If the initial offer provides two weeks of pay for each year of service, requesting three or four weeks may be reasonable. Employers often want a smooth departure and may have room to improve the offer.
You can also negotiate continued employee benefits. Asking the company to cover your health insurance premiums for six, 12, or 18 months could save you thousands of dollars. Benefits continuation may also be easier for an employer to approve than an equivalent cash payment.
Review the vesting schedule for your 401(k) match, stock options, and restricted stock. If you are approaching a vesting date or cliff, ask whether those benefits can vest immediately as part of your exit package. Otherwise, you could leave valuable compensation behind.
Restrictive terms may provide additional negotiating leverage. If the company wants you to sign a noncompete, confidentiality, release, or similar agreement, remember that the terms may be negotiable. Review the complete document rather than focusing only on the severance payment.
Finally, compare a lump-sum payment with salary continuation. A lump sum provides immediate access to the money, but it may affect your taxable income and eligibility for ACA health insurance subsidies. Salary continuation spreads the income across multiple pay periods and may allow certain benefits to remain active longer.
The right decision depends on your cash flow, taxes, healthcare needs, benefits, and future employment plans. Consider having an employment attorney, tax professional, or financial advisor review the agreement before you sign it.
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