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 for employers.

• 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 because—in its infinite wisdom, just when you need money the most—the 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 purchase.

• Unemployment Benefits - How to contact your state employment service (aka, unemployment office or Career One Stop Center) to file a claim for unemployment or disability compensation, and apply for job services, training programs, and other benefits.

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