You just got the news. The door closes, the HR person has that specific "I’m sorry" face, and suddenly your steady paycheck is an expiring asset. It’s a gut punch. Most people just stare at the paperwork, sign where they’re told, and walk out the door as fast as they can to avoid the embarrassment. Don't do that. You’re leaving money on the table—potentially tens of thousands of dollars. Learning how to negotiate a severance package is not about being greedy or litigious; it’s about bridge-building and financial survival. You’ve given this company your time, your brainpower, and probably a few gray hairs. You deserve a landing pad that doesn't feel like concrete.
Most employees think a severance offer is a "take it or leave it" deal. That’s a myth. It's actually a contract. In exchange for money, you’re usually signing away your right to sue or your right to work for a competitor for a while. That has value. If they want you to sign that release of claims, they have to pay for the privilege.
The Reality of the First Offer
Companies usually have a standard formula. Maybe it’s one week of pay for every year you’ve been there. Or a flat month for everyone. But here’s the kicker: that first document they slide across the desk is a starting point. It’s their "low-ball" version designed to protect their budget.
If you’ve been a high performer, or if you’re being let go in a way that feels legally "gray," you have leverage. You aren't just a line item. You are a person with institutional knowledge. Sometimes, they just want you to go away quietly and quickly. That silence is worth something. Honestly, HR departments are often just as stressed as you are during layoffs. They want the paperwork filed and the box checked. If you come to them with a reasonable, professional counter-offer, they might just say yes to avoid the headache of a prolonged back-and-forth.
Timing is everything
Never sign on the spot. Seriously. I don't care how much pressure they put on you or if they say "this offer expires at 5:00 PM." In many states, and especially if you are over 40 (thanks to the Older Workers Benefit Protection Act), you are legally required to have a specific amount of time—often 21 to 45 days—to review the agreement. Use that time. Take the papers home. Cry if you need to. Then, get to work.
What Can You Actually Ask For?
It isn't just about the base salary. People fixate on the "weeks of pay" part, but that's just the tip of the iceberg. You need to look at the whole picture.
- COBRA and Healthcare: This is the big one. Losing insurance is terrifying. You can negotiate for the company to pay your COBRA premiums for three, six, or even twelve months. That’s cash in your pocket.
- Outplacement Services: Some companies offer "career coaching." If you don't want it, ask for the cash equivalent instead. If you do want it, make sure it’s a high-quality firm and not just a website with some 2012-era resume templates.
- Unused PTO: Check your state laws. In places like California, they have to pay out your vacation time anyway. Don't let them act like they're doing you a favor by giving you what the law already requires.
- The Narrative: This is underrated. You want to control the story. Ask for a "neutral reference" or a specific "agreed-upon statement" regarding your departure. This ensures that when your next employer calls, they hear "they were a valued team member who left due to restructuring" rather than something vague or damaging.
- Equity and Bonuses: If you have stocks or options that are about to vest, ask for accelerated vesting. If you’re being let go in November, ask for a pro-rated portion of your annual bonus. You did the work for 11 months; you should get paid for it.
The "Over 40" Factor
If you're over 40, you have extra protections under the Age Discrimination in Employment Act (ADEA). Companies are terrified of age discrimination suits. If they are laying off a group, they have to provide you with the ages and job titles of everyone being let go and everyone being kept. If you see a pattern where only the older, higher-paid people are getting the boot, you have massive leverage. Use it gently, but use it.
How to Conduct the Negotiation Without Sounding Entitled
Tone is the "secret sauce" here. If you come in swinging and threatening to sue, they’ll clam up and send you to the legal department. Once the lawyers are involved, the "human" element is gone. You want to stay in the "problem-solving" phase.
Try a script like this: "I’ve truly valued my time here and I’m disappointed to be leaving. Looking at the current offer, I’m concerned about the gap in my healthcare coverage and the timing of my upcoming bonus. Given my contributions to [Project X] over the last three years, would the company be willing to extend the severance to [Number] weeks and cover COBRA for six months?"
It’s professional. It’s specific. It links your request to your past performance.
Don't forget the taxes
Severance is taxed. Heavily. Often, it’s withheld at a flat supplemental rate (usually around 22% for federal). If you get a $20,000 check, don't expect to see $20,000 in your bank account. You might want to ask if they can split the payment between two tax years if the timing is right. Or, if they are paying for things like outplacement or legal fees directly, that might not count as taxable income for you.
Common Mistakes People Make
The biggest mistake is the "emotional exit." Screaming, stealing office supplies, or sending a "scorched earth" email to the entire company. Doing this kills your leverage instantly. Why would they give you extra money if you’ve already proven you’re a liability? Keep it cool. Even if you hate them. Especially if you hate them.
Another error is ignoring the "Non-Disparagement" clause. Most agreements say you can't say anything bad about the company. That’s fine, but it should be mutual. If you can't badmouth them, they shouldn't be allowed to badmouth you. Ask for a mutual non-disparagement clause. It protects your reputation just as much as theirs.
And please, read the non-compete section carefully. In 2024, the FTC moved to ban most non-competes, but legal challenges are ongoing and state laws vary wildly. If your severance agreement tries to block you from working in your industry for two years, that’s a massive red flag. You might be trading a few weeks of pay for your entire career's future. That’s a bad trade.
Dealing with a Massive Layoff vs. an Individual Termination
If you are part of a 1,000-person layoff, your room to negotiate is smaller. The "standard package" is usually baked in. However, you can still push for things that don't cost them "extra" cash, like keeping your laptop or getting a longer window to exercise your stock options.
If you are an individual termination, the sky is the limit. They are letting you go specifically. This is often more personal and more negotiable. If there was any conflict with a manager or any recent HR complaints you filed, they will be very motivated to get a signed release of claims from you.
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Actionable Steps for Your Exit
- Get the Offer in Writing: Never negotiate based on a phone call. Get the full document.
- Audit Your Contributions: Make a list of your wins over the last 12 months. Use this as your "why" during the talk.
- Check Your Contract: Did you sign an offer letter that already promised severance? Sometimes companies "forget" they already agreed to a certain amount.
- Consult an Employment Attorney: Even one hour of their time can be worth it. They see these documents every day and can spot "poison pills" you’d never notice.
- Draft a Counter-Proposal: Don't just ask for "more." Ask for specific numbers and explain why.
- Review Health Benefits: Calculate exactly what COBRA will cost you per month. Use that hard number in your negotiation.
Negotiating isn't a sign of conflict. It's the final business transaction of your employment. Treat it with the same rigor you brought to your job every day. You aren't asking for a gift; you're negotiating the price of your signature and your smooth transition out of the company. Take a breath. You've got this.
Key Insights:
Severance is a mutual agreement, not a gift. Always prioritize healthcare and mutual non-disparagement clauses during the discussion. If you are part of a protected class or have evidence of unfair treatment, your leverage increases significantly. Finally, ensure any "agreed-upon" reference is documented in the final signed version of the contract to protect your future job searches.