Posted: September 15, 2020
Employee severance packages encompass pay and benefits paid upon unwillful termination and can also refer to the severance agreements themselves. Severance agreements are required in order to secure severance pay for a soon to be ex-employee. They will generally include a non-disparagement agreement which protects the company from being sued or disparaged by the ex-employee. Severance packages are not required by law. They are, on the other hand, offered by an employer in order to accomplish a goal. They can ensure that an ex-employee will not cause any problems for the employer in the future due to a variety of reasons and legal claims. Lawsuits and disparagement will essentially be avoided by offering a package upon termination. In this way, severance packages are treated as business transactions. Many executives and Chief Executive Officers are extended pre-employment severance agreements which help to strengthen a salary offer making for a more competitive total package. This effectively guarantees a future executive that he or she will in fact receive severance pay upon termination. Because severance packages are not required by law, this can be a very comforting detail for executives. Whether discussing pre-employment severance packages or ones that are offered at the time of termination, negotiation is something to consider. When it comes to the question of how much severance pay should be, there is no simple answer. Experienced severance attorneys may be able to assist in determining the answer, as it varies greatly and depends on many factors. Pertinent factors include the size of the company, length of time that an employee has been with the company, employee title, type of industry, and many others measures. Things to consider in assessing the strength and fairness of a severance package are pay-out details like installments versus lump sums. Will you continue to receive payments even if other employment is found? Are there clawbacks that may require sign-on bonuses to be repaid upon early termination? Along with non-disparagement agreements, a “general release of claims” will also include a confidentiality agreement to keep the negotiations and severance amounts private. Negotiating the terms of a confidentiality agreement may benefit the employee greatly, as they can be very broad. Employers are the ones that have the most to gain when it comes to confidentiality agreements, so this part of the package should be heavily scruitized. Non-disparagement agreements can be equally one-sided and prevent an ex-employee from defaming the company, but may not be equally protected from critical comments made by the company, creating unideal risk for the former employee. Mutual non-disparagement agreements can help to alleviate that situation and are ideal for employees that leave on sour terms. There are risks when it comes to severance package negotiations. Bargaining positions may be weakened or lost due to ill-prepared arguments. It is quite possible for a severance package to be lessened by an employer after negotiations. Consultation with an attorney or executive compensation consultant is highly recommended when facing severance package negotiations. To learn more about maximizing executive salary, visit our Contact Page, or contact us directly by email at email@example.com or by phone at 415-618-6060.