Layoff Severance Package
Never been laid off or been awhile since your last? Here's what you
might receive in a severance package. Please keep in mind that it may
differ from yours, depending on your ex-employer's policy. Severance
packages are benefits. With few exceptions, providing benefits is optional
- Severance Pay - This may range from two weeks to as
much as six months or more at your current salary, plus unused
vacation and maybe even sick pay and floating holidays. Your
ex-employer may pay it all in one lump sum or in regularly-scheduled
paychecks. If you're paid in a lump sum, you'll probably be taxed at a
higher rate, right off the top. That's becausein
its infinite wisdom, just when you need money the mostthe
IRS taxes lump severance pay as a bonus! You may get some
back in your tax return; not that it helps much if you're laid off at
the beginning of the year. Whichever way you're paid, if you need the
cash, you might want to ask your ex-employer to stop voluntary
deductions, such as contributions to your 401(k).
- Separation Agreement - This binding contract
outlines the terms of your layoff, and essentially states that you
will not disclose trade secrets or hold the company liable for
terminating you. If you sign it, you may be entitled to a better
severance package. Yup, it's a legal bribe according to a very
expensive, California labor attorney with whom this writer consulted.
Since it might be a binding, contract-like document in your state too,
you may not want to sign it until you've played out all your options.
- Outplacement Services - Your ex-employer may
contract to consultants, who help you to help yourself. Typically,
they don't find you a job per se, but offer seminars and workshops
that help you boost your confidence, practice interviewing, and update
your résumé. They may also provide free access to computers,
printers, phones, fax machines and job listings.
- Health Insurance - Coverage may end on the day
you're laid off, or shortly thereafter. By US law, the Consolidated
Omnibus Budget Reconciliation Act (COBRA) allows you to continue your
coverage at group rates, plus a 2% administration fee. But, you may be
able to find a better deal. Read more about COBRA.
- Life Insurance - Typically ends on the day you're
laid off, and is not covered under COBRA. But, your ex-employer may
offer you a continuance option. It usually isn't cheap, and you may be
able to find a better deal.
- Disability Insurance - The same as life insurance.
Alternately, you might be covered by your state unemployment plan for
free, but the weekly benefit amount may be less than private plans.
- Retirement Plan - Information explaining what your
options are for 401(k), profit sharing and
other retirement accounts.
- Stock Options - Information explaining what your
choices are for company stocks you're purchasing or have the option to
|Barbara Block suggests
that you might be able to negotiate a better severance package, or
even keep your job.
Searching: Technical supports Equal
Copyright © 1998, J. Steven Niznik. All Rights Reserved.