How Much Severance Pay Am I Entitled To?

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Photo-Illustration: by The Cut; Photos: Getty Images

If you’re fired or laid off, can you expect or negotiate severance pay? What about if you’re resigning? You probably know that severance pay is an option in some situations, but you might not know who gets it, when, why, or how to take full advantage of your options. When you’re in the middle of a layoff, you’re likely to have stress and heightened emotions, so you want to figure this stuff out before you need to know about it.

Below we’ve answered the most common questions people have about severance pay and how to get it.

What is severance pay?

Sometimes when an employer lays off or fires an employee, the company will offer money — either a lump sum or a series of payments — to soften their landing. That’s severance pay. (Those agreements can also sometimes include continuing your health-care benefits for a specific period of time.)

Why do companies offer severance pay?

Companies offer severance so that your income won’t disappear overnight. That’s obviously good for you, but it’s good for the company, too, from a morale standpoint. Especially during layoffs or in the case of a sensitive or controversial firing, the employees who remain want to know that the company is trying to cushion the blow of the termination’s financial impact on their former coworkers. It also reassures them that the company is likely to try to do right by them if their own jobs are ever eliminated.

There’s something in it for the company, too: In exchange for severance, you’ll almost always be required to sign what’s known as a “general release,” a legal document releasing the company from any future legal claims. In other words, to receive the severance, you’ll need to agree that you won’t sue them over something like discrimination or harassment in the future. These agreements are a standard part of severance pay; the fact that your employer wants you to sign one doesn’t indicate that they think you have a legal claim (although they might!).

Is severance pay required by law?

No. Severance pay is up to the company’s discretion, unless you have a contract that requires it. However, if your company has more than 100 employees and is laying off at least 50 people, the federal WARN Act requires it to provide workers with at least 60 days’ notice of the impending layoff. If it doesn’t do that, the law requires it to pay you for up to 60 days after the layoff.

How much severance pay is typical?

Different companies offer different amounts. The most common model is to use a formula based on your salary and how long you’ve worked there. For example, a company might offer two weeks’ salary for every year you’ve been there — so if you’ve worked there four years, you’d be offered eight weeks of salary. One or two weeks of salary per year of employment is typical, but some companies offer more and some less.

Under what circumstances might you be offered severance pay?

Most commonly, you’ll be offered severance if you’re being laid off — meaning that your job is being eliminated.

Severance when you’re being fired for performance reasons is less common, but it does happen and sometimes there can be room to negotiate for it even if it’s not initially offered (more on this in a minute). The chances of getting severance when you’re fired go up if (a) the company believes you made a good-faith effort to succeed but the job wasn’t the right fit; (b) the job changed after you were hired, so the company sees that it’s not your “fault” that it didn’t work out; or (c) the problems were strictly performance-related and not about misconduct. You might also be offered severance when being fired if the company has a reason for wanting you to sign that release of legal claims — like if your HR department worries you have grounds to sue over something that happened during your employment. (That may be the case even if the company believes it followed the law and would ultimately prevail in a lawsuit; they often prefer to pay severance to ensure they don’t have to spend more resources fighting a legal battle down the road.)

Can you get severance pay when you quit?

Typically, no. Severance is usually for employees who are being let go involuntarily.

However, there are some exceptions to this. If it’s clear that your work isn’t going well but your employer prefers not to fire you (for example, if you’re a long-time employee or if the requirements of the job changed through no fault of your own), you might be able to negotiate an exit that includes severance. Or, if you believe you have a legal claim against your employer, you might be able to negotiate a departure that includes severance in exchange for signing a release of claims.

In most cases, though, employees who voluntarily resign don’t receive severance.

Can you negotiate for more severance pay?

It’s generally reasonable to try, and you might get it.

In negotiating for more, think about any factors that might sway the company in your favor. For example, if your manager persuaded you to turn down a job at a different company earlier this year, you could argue that your severance should be increased because your loyalty to the company put you in this position. Or if you recently relocated for the job, you could argue that the company owes you more severance to offset those moving costs, since you took the company at its word that it would have long-term work for you. If they don’t want to appear heartless, they may help mitigate those financial consequences now. The people you’re negotiating with are human and can sometimes be swayed by arguments about fairness or ethics.

Also keep in mind that you can negotiate for more than just money. You can negotiate to be paid for unused vacation and sick days (if you don’t live in a state that requires that regardless), having the company cover your health-insurance premiums for longer, or even keeping your company laptop.

Do you have to sign on the spot?

No! Ask how much time you have to decide whether or not to accept the severance package. Typically, you’ll be given a few days or even a few weeks to review the offer. (If you’re over 40 years old, federal law requires that you be given at least 21 days.)

Whatever you do, don’t sign on the spot. Take the agreement home, read it carefully, and give real thought to the rights you’d be giving up. In some cases it will make sense to talk to a lawyer — especially if you think you have legal claims against the company, or if you’re being asked to sign a noncompete that would limit what other types of work you can accept after you depart. A lawyer can advise you on whether to sign and can also help you negotiate a better package. To find an attorney who specializes in employment issues, contact your state bar association, the National Employment Lawyers Association, or use Workplace Fairness.

Find even more career advice from Alison Green on her website, Ask a Manager. Got a question for her? Email (and read our submission terms here).

How Much Severance Pay Am I Entitled To?