When you’re contemplating taking a new job, the last thing you’re considering is leaving it. But as an executive, that’s exactly when you should be thinking through your severance package.
“I think of severance kind of like a prenup,” says Kat Campbell, Chief Member and Founder at HowardHelen, an HR and People Consulting Firm. “You don’t think anything is ever gonna go wrong. You hope that things will be happy forever. But the reality is you want to protect yourself.”
When you’re able to negotiate severance up front during your initial offer, you’re able to do it from a place where there are no hard feelings on either side and you can come to an agreement that’s fair for both parties, Campbell adds.
Negotiating severance is especially important for executives because the job search at the C- and VP level typically takes six months to a year, due to a lack of open positions and more decision-makers at the top. Plus, most senior leaders are single-mindedly focused on their current job, which equals less time for networking and job-hunting.
For women who are seeking the top spot, it’s even more crucial. Women CEOs tend to depart the role earlier than their male counterparts, since they are often appointed to leadership roles during times of crisis or turmoil — and then blamed when the turnaround seems insurmountable. “As a senior woman, it's not like you can just apply to a job and two weeks later, you're set up and you're ready to go,” says Campbell. “The window is so much longer. There’s also often things like noncompetes, so you just want to be sure that you're financially protected if the worst thing happens.”
What and How to Negotiate
At the executive level, receiving a severance package is fairly standard practice as a part of a job offer. Not only that, but corporations expect you to negotiate it.
“If you’re in the final stages, it should never be a roadblock, and it won't be a complete shock to the person you're dealing with,” says Campbell. “You can approach it from a teamwork perspective, using language like ‘I don't think this is going to happen, but in case, how can we both protect ourselves?’” You can identify the things that are important to both parties, and identify the things that are typically done for other executives at the company.
“Don’t take the first offer,” advises Devika Brij, leadership coach and Founder/CEO of Brij the Gap Consulting. “First, see what the general severance formula is for your specific corporation. Some organizations will pay x amount of weeks for x amount of years served.” If you understand what the formula is, you can open up a discussion to then receive more.
You should also request any earned but unpaid incentive compensation, such as bonuses or commissions, be paid to you as if you had remained employed with the company. Additionally, discuss the possibility of receiving a prorated portion of future bonuses or commissions that you would have been eligible for had your employment continued. This includes equity and stock options; negotiate for accelerated vesting or even a longer exercise period for stock options.
Campbell says accrued unused vacation time is an often overlooked piece of compensation that can have a substantial financial impact, as well as healthcare benefits, which you can ask to be covered for months following your termination.
Beyond Dollars and Cents
While the financial protection of a severance package is often top of mind, reputation management and the non-tangible aspects of the post-employment relationship should play an equally important role in your negotiations.
“The higher in seniority you are, it’s more likely that your prospective new employer will vet you with previous employers,” says Brij. “Ensure you agree on how your company will respond to reference checks to ensure your brand and reputation is protected.”
This can be handled in an NDA or a non-disparagement agreement. Campbell notes that it's typical to ensure that HR wouldn’t say why someone was terminated, but rather say something like the employee worked here from X to Y year, with the title of Z.
She’s also seen more executives start to negotiate outplacement services, which can include having a third party work with you to figure out what you want to do next, review your resume, and connect you with prospective employers and networking opportunities.
If you mutually end your relationship with the company, don’t count out continuing the relationship on a contracting basis. “If you are leaving the company on good terms and desire to remain connected to the organization, you can negotiate the possibility of consulting or advising the organization for compensation,” says Brij. “This will ensure your continued connection and contribution while enabling you to create income.”
After You Start
Even after you start a role and have accepted the severance package you were offered, it doesn’t mean it’s set in stone. If you’re at a company and start to see warning signs like decreasing profitability or layoffs, you can potentially renegotiate your package and ensure it’s still in line with your expectations. Even though it might seem like bad form to bring up when the company faces challenges, you can position your skills as an asset for navigating the choppy waters ahead and an added incentive to stay through any immediate turmoil rather than jumping ship at the first sign of trouble.
Even if you’re terminated before you can renew, you still have the opportunity to get more than your agreement may allow. “You can get a lawyer involved,” reminds Campbell. “You don’t necessarily have to agree to their terms.”
While it might be challenging to plan for an ending before you begin, crafting your ideal severance package can keep your future protected, so you can perform your best in the present for the job ahead.
