If you’re an employee facing a severance situation, understanding what should be included in a severance package is crucial. A severance package is typically offered to employees upon termination of employment. Its contents can vary based on the company’s policies, the reason for termination and the length of your service.
Knowing what to expect in a severance package can help you make informed decisions and negotiate if necessary.
Financial compensation
The core of most severance packages is financial compensation. This is often calculated based on your tenure with the company. For example, some companies offer a week’s pay for each year of service, but this can vary. The package may also include payment for unused vacation or sick days.
Benefits continuation
Continuation of benefits is another critical component. This might include extending your health insurance benefits for a certain period after termination. Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), U.S. employees can continue their group health benefits for a limited period under certain circumstances, but you usually have to pay the full premium.
Outplacement services
Many severance packages include outplacement services to help you transition to a new job. These services can offer career counseling, resume writing assistance and job search resources.
Stock options and retirement plans
If you have stock options or are part of a retirement plan, such as a 401(k), your severance package should outline how these are handled. There may be specific provisions about vesting or selling your stock options.
Non-compete and non-disclosure agreements
Some companies might include non-compete or non-disclosure agreements in their severance packages. These can restrict your ability to work for competitors or share proprietary information. Understanding the scope and duration of these clauses is essential.
Legal rights and waivers
Severance packages often include a release or waiver, where you agree not to sue the company for wrongful termination or other legal claims. Reading and understanding these documents before signing is crucial because they can affect your legal rights.
You have the right to review the severance package and negotiate its terms. Consulting with someone familiar with these matters is often beneficial, especially if you have concerns about any of its components.