Negotiating Your Severance Package

Negotiating Your Severance Package

In most cases, it is safe to assume that a party’s first offer is not its best offer. Negotiating your severance package is often necessary to ensure you are getting the best package from your employer. The goal of your severance package is to compensate you as you would have been had you not been terminated, and until you find comparable employment. 

If you do not have an enforceable termination clause in your contract that limits your termination entitlements, your entitlement is determined by the common law.  In Ontario, your severance entitlement under the common law will start at one month of compensation per year of service. However, it is linked to and will vary depending on several factors, the most important of which are your age, years of service, and the seniority of your position. Older managers or executives with many years of service are entitled to more generous packages than younger employees in junior positions.

Take your time

Often, employers will provide a deadline by which they expect you to sign their severance agreement and release. However, if you plan on negotiating your severance package, there is no need for you to adhere to that deadline. In most cases, employers will not revoke a severance offer just because you have not adhered to the deadline they have imposed. If your employer is pushing you to sign an agreement and waiver/release in a short timeframe, this is a red flag.

Talk to your colleagues

Your employment lawyer will ask what your colleagues’ experiences have been in negotiating severance packages with your employer.  What packages were they offered, and how cooperative was the employer in negotiations?

Remember the extras

Be sure not to sign any waivers of your rights or releases before consulting with an employment lawyer. You will likely need to waive certain rights in exchange for a severance package, if it goes above and beyond what employment statutes require your employer to pay you unconditionally. These include your right to sue, compete with, or share information regarding your employer. Your employer will be interested in having you restrict your rights in these ways, so therein lies your leverage in negotiating your severance package.

It is also important to remember that you need not limit yourself to negotiating the dollar amounts in your severance package. If your employer is not flexible with the amount of severance, sometimes the format of the payments can be altered to achieve a more favourable tax treatment. You can, and should, depending on how important they are to you, negotiate for longer benefits coverage continuation (health, dental, disability, pension, etc.), outplacement counselling, and the continuation of any other perks that you had while employed.

Our lawyers at Whitten & Lublin are experienced in negotiating severance packages.  We can review your severance package to show you areas of potential improvement and help you in negotiating your severance package with your employer. Please contact us online or by phone at (416) 640-2667 today.