In an article in Personnel magazine, Dowdle and Eide go on to say that most companies do not publish any printed information on severance policies. Companies do this to allow company management to deal with each severance arrangement as an individual negotiation. In fact, a survey by the Administrative Management Society showed that approximately 60 percent of the companies the society surveyed had no formal severance policy.
This evidence should lead you to believe that, no matter what your former manager tells you, there is no such thing as a "standard" severance arrangement. The more research you have done about your company's past performance in this area, the better your chances will be of getting what you need.
Some companies use a formula (based on such factors as seniority or job title) to determine your severance agreement.
But, as when companies hire new employees, these "formulas" are often only a starting point. If you are skeptical on this point, ask yourself if you believe that everyone at your level with approximately your experience is currently paid the exact same salary by your company. The answer is certainly no. When you are hired, you negotiate a salary that may be significantly higher than those of your peers, for no other reason than the fact that you are a better negotiator than they were when they were hired. The same holds true for negotiating severance pay.
Some Standards
To give you an idea of an average severance arrangement, American Demographics magazine quotes figures compiled by Drake Beam Morin, a New York outplacement firm. In 1988 the firm dealt with a variety of clients in all age groups, with an average age of 44. Drake Beam Morin s clients tend to come from middle-management positions with several years of professional experience. Still, the average length of severance pay for these professionals was 6.7 months.
You should also know that, under the law, severance-pay programs are covered under the Employee Retirement Income Security Act (ERISA), making such plans subject to government regulation. Again, companies may tend to be secretive about past severance agreements because, under the ERISA, employees can sue if they feel they are not receiving adequate severance compensation. An attorney will be able to provide more information on the ERISA, should you need to use it to appeal your company's severance offer.
What to Ask For
When the company hired you, you negotiated a starting salary. As with a starting salary, there is no set formula to use when determining what you should ask for in a severance arrangement. In general, the more you know about past arrangements, the better prepared you will be to state your case. Before any discussion of severance pay is begun, be sure of what you expect, and be ready to ask for it. Some things to consider are listed as follows:
Term of the agreement and payments. Not only is it important to discuss the term of the agreement, you should also be prepared to discuss the nature and timing of severance payments. Will you continue "on the payroll" or will you simply receive a lump-sum payment? Before you decide, you might want to call your local unemployment office to determine how such payments can affect your eligibility for unemployment insurance. In addition, your decision about whether to stay on the payroll can hinge on your current eligibility for your company's pension plan. While you remain on the payroll, the company will continue to make contributions.
Extension of benefits. Medical and dental bills can pile up quickly, especially if you have a family. Providing you with continued coverage throughout the severance period is not a large cost to the company. The lack of such coverage can, however, be a huge cost to you. Disability insurance is another benefit the company pays for that you may not be able to do without. Although the odds of your having a disabling accident during a period of unemployment are small, you still need to protect yourself from financial disaster. The issue of benefits is an important bargaining chip in your severance negotiations.
If you cannot get your employer to extend your benefits at no cost to you, you should be aware that under the law your employer may be required to allow you to buy insurance at the company's group rate for a certain period of time after your position is terminated. According to a statute of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, your employer may be required to allow you to participate in the company's group health plan for up to 18 months from the date of your termination. A few criteria may apply, but in general, if your employer has more than 20 employees and you were not terminated for misconduct, you should be eligible to continue to receive health benefits for which you pay the group rate. Your employer's human resources manager should have information on COBRA laws and their impact on your situation.
