If you have lost your job through no fault of your own, your former employer might present you with a severance package agreement. Your severance package will include your last paycheck and severance pay. It could also have benefits such as continuing your medical or dental insurance coverage and reimbursement for unused sick days and vacation days.
Did you know it was possible to negotiate a severance agreement or that you were not forced to accept your former employer’s offer? Here are a few of the top things all employees should know about severance.
The money you will receive depends on different factors
If you have only been working for your employer for a year or two, you can expect a much lower severance pay than if you have been working for them for nearly ten years. The money you will be eligible to receive will depend on other factors, such as the details of your employment contract, where you live, and the reason why you lost your job.
Additionally, your severance agreement should detail how much money you will receive. It might also contain information about the benefits that your former employer is offering you.
You can try to negotiate your severance package
The details of your severance agreement are not set in stone. Depending on your relationship with your former employer, you could talk to them to try and negotiate. After all, you will have to start looking for a new job while still paying your rent and putting food on the table.
If you feel like you should receive more severance, explain it to your former boss. You could also decide that instead of receiving more money, you would like your severance package to focus on continuing your benefits.
There are multiple ways to receive your severance pay
Your former employer could even allow you to choose how you want to receive your severance pay. You could ask to receive a lump-sum payment or deferred payments that will continue for a few years.
It’s also possible to receive your severance to continue your regular salary and benefits for a limited amount of time. It all depends on your preferences. You may have different priorities now that you have lost your job and must start looking for a new one.
Check if your employer will help you find a new job
One of the benefits your former employer could offer you is some help with your transition. They could, for example, provide you with the services of an outplacement company that could help you write and edit your resume. They might also help you search for employment opportunities and prepare for an interview.
Your former employer could also simply assure you that they will be ready to give you a good letter of recommendation whenever you ask for one. The details of what they are ready to do to help you find a new job should be a part of your severance agreement.
Your severance package could come with confidentiality agreements
You could be asked to sign some additional documents along with your severance agreement. A confidentiality agreement, for example, aims to ensure that you will not reveal any sensitive information about the company to anyone after being terminated. You could also be asked to sign a non-compete agreement, preventing you from working with a competitor or within a specific geographical area.
Review your severance agreement with an employment lawyer
Whether or not you tried to negotiate your severance package, you will need to sign a severance agreement before you can receive it. You should have at least a whole week to review the deal. Then, you can decide whether to accept this offer or not.
Ideally, you should review your severance agreement with employment lawyers, especially if you have questions or concerns. Your lawyer will help you determine if this agreement is fair and whether signing it would make you give up any important rights.
Doing this is even more important if your former employer asks you to sign a non-compete clause. If your employment lawyer determines the offer made by your former employer is unfair, they will help you figure out what you should do next.
You will need to pay income tax on your severance
Finally, you should know that you will need to pay income tax on your severance. If you receive your severance as a continuation of your regular salary, you will pay the same amount of income tax as usual. However, if you receive a lump-sum payment, you will have to pay more income tax. It’s worth contemplating the decision if your former employer allows you to choose how you want to receive your money.