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6 Common Mistakes Employees Make With Severance Packages
A severance package is a down payment on your future plans. The severance package represents what you get to start the next chapter of your life.
Unfortunately, many employees don't have a lot of experience with severance arrangements. Consequently, when their employer offers severance, they can make a number of mistakes that could dramatically impact their future.
What kinds of errors do people make when negotiating their own severance packages? And how can you avoid those mistakes? Here are a few answers.
1. Not Asking for Enough
Many employees are in a hurry to get the exiting process done, and they don't act aggressively enough when negotiating what they take with them. They may not even know that they can negotiate, instead accepting the employer's first offer as the only option.
In actuality, the severance package is generally highly individualized — particularly when it comes to management and executive positions which are often unique in responsibility and compensation.
2. Asking for Too Much
Some people, on the other hand, set their sights impossibly high, which can strain negotiations. Worse, this approach delays the negotiations and may sour the employer's attitude toward the rest of the process.
The trick to successful negotiation is knowing what leverage you have, what you really need, and what a reasonable compensation is. With an accurate expectation, you will know how to ask for enough to leave the negotiating room without damaging your position.
3. Letting Grievances Get in the Way
Many people experience intense emotions after being laid off or fired. While those emotions are valid, expressing them too strongly can work to your disadvantage in negotiations, as it can easily lead to quick capitulation, holding out too long, or holding onto grudges.
A severance package isn't about punishing an employer for mistreatment — perceived or otherwise. If you have actionable grievances, address them in other legal proceedings.
4. Signing Non-Compete Agreements
Many severance packages — particularly for those who were executives, researchers, engineers, or sales staff — include agreements not to compete with the old employer. Non-compete agreements and documents with similar wording, such as non-solicit agreements, limit how you can compete with your former employer.
Generally, a non-compete agreement offers some kind of compensation for your agreement to these terms — and in fact, must legally provide some kind of recompense. But if you don't understand your rights when signing a non-compete agreement, you could agree to one prematurely. The agreement may also be too broadly defined or too geographically wide to be reasonable.
5. Forgetting About Benefits
Severance isn't just about cash money. You can also negotiate certain benefits, such as health insurance, life insurance, use of company property, or investment perks. But you have to know what is most important and plan for the longer term.
6. Signing Away Rights
Fine print in many severance contracts includes an agreement to revoke the employee's rights to certain actions. This includes the right to sue the former employer for claims that you have a legitimate right to pursue, including sexual harassment, unfair termination, workers' compensation, and discriminatory behavior. Maintaining these rights is vital if you have any concerns about your employer's behavior.
What You Can Do
Avoid making these errors by working with an experienced business attorney who specializes in protecting employee rights and who will review your package offer. With an attorney on your side, you will be able to remain objective, negotiate fairly, and get what you deserve from your former employer.
Attorney Allen D. Arnold can help you successfully end this part of your career and start on the next. Call today to make an appointment.
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