Don't let this happen to you!
Dan left a high-paying job with an insurance company in Virginia to sign on
with a rapidly-growing company outside his industry in Chicago. He found
the opportunity particularly attractive, as it offered a chance to earn equity,
instead of just working for salary.
Dan uprooted his family, got settled, and soon became very busy keeping pace
with the business flowing into this lucrative company.
All went well until the company got some very negative publicity.
Actually, it was a competitor that got the negative publicity, but it didn't
matter because it spilled over onto his company. The company's rapid
growth stalled, and then it went into free fall. Soon, they were awash in
red ink, and they had to let Dan go after less than a year on the job.
The company president was dutifully sorry and said all the right things, but
all he gave Dan was three weeks of severance, and a skimpy outplacement package.
The president actually thought he was being generous to give Dan three weeks for
less than one year's service.
Dan was in shock and didn't protest as vigorously as he should have.
Finding another job took over eight months, and the net loss to Dan was tens of
thousands of dollars. The nest egg he had worked so hard to build up was
The lesson is to negotiate severance before you accept a position.
Now, many people will cringe when they hear this, and say
negotiating severance sounds so uncomfortable. But the alternative is to
wind up like Dan. And it's really not so painful to do negotiate this when
you do it right. Here's how we coached Dan to negotiate severance when he
got the next job offer.
Dan: Things seem to be going extremely well around here. I'm
very impressed with what I've seen of the company.
The Boss: Yes, this is really a great company to work for. I'm
sure you'll love it here.
Dan: I'm very comfortable with my ability to perform, but let me ask
you something. I don't suppose you anticipate anything like a
buyout, merger, or change in the industry that might put my job in danger, do
The Boss: No, of course not. I wouldn't worry about that for
even a second. This company is solid as a rock.
Dan: That's what I figured. Then, I don't suppose you would have
any difficulty agreeing to severance in the unlikely event that the something
unexpected happens to the company?
Dan then negotiated a package that included a minimum number of weeks of
severance, a good outplacement package that included support staff, office space
and phone, and an extension of his medical benefits.
Don't worry about feeling like you will appear desperate or ungrateful.
This is just being smart. Keep reminding yourself of the consequences to
you and your family if the company runs into problems like Dan's did.
What do you negotiate for? A typical severance package includes one or
two weeks' salary for every year of service, outplacement counseling, accrued
vacation pay and extended medical coverage, among other benefits. Special
circumstances also warrant additional consideration. For example, since
Dan moved halfway across the country to take this job.
As with most things in salary negotiations, I recommend getting a severance
arrangement in writing. If the boss balks at putting this or other compensation
matters in writing, you might say, "I know well meaning people can hear
different things from the same conversation, and I certainly wouldn't want to
start this employment relationship on the wrong foot by having a
misunderstanding about what we agreed to today." If the manager still
refuses, send a letter summarizing your oral agreement. This letter can be
enforced as a contract.
If you didn't negotiate severance in advance, and you're being laid off, see
the separate article on this topic.