Severance Packages: What to Ask For Before You Sign

The layoff call came on a Tuesday morning in September, and by the afternoon the agreement was in her inbox. The product manager in Chicago had spent eleven years at the same software company, and the offer reflected it: eight weeks of base pay, three months of paid health coverage, and a release that ran twenty-one pages. She had seven days to decide. She signed on day six, mostly because she was afraid that asking for more would cost her the offer entirely.

That fear is common, and it is mostly unfounded. Most severance offers are negotiable, and most employees never test them. Outplacement firms that track these agreements, Challenger, Gray & Christmas among them, consistently report norms of one to two weeks of pay per year of service, with more for longer tenure and higher rank. The distance between what an employer offers first and what it will ultimately sign is often several weeks of pay, plus benefits, plus concessions in the fine print. What follows is what the norms are, what is genuinely on the table, which clauses can bind you for years after your last paycheck, and what to ask for in the first conversation.

The norms, and who gets more

Most employers work from a rough formula: one to two weeks of pay for each year of service, capped somewhere between twelve and twenty-six weeks. Someone with five years at a company can typically expect five to ten weeks. Someone with twenty might be offered twenty to thirty weeks, though caps intervene. Executive arrangements run differently — three to twelve months is common, and a full year is not unusual at the C-suite level.

Tenure is not the only variable. Rank matters, and so does the reason for the departure. Mass layoffs tend to produce standardized formulas applied evenly across a group; individual terminations leave more room. Leverage also rises with the awkwardness of the separation. When a company wants a quiet exit from a senior person, or when the departure follows a complaint, the first offer often has more give in it than the same company would extend in a routine reduction.

The survey evidence on who negotiates is thin but consistent. Robert Half's polling of human-resources managers has repeatedly found that more than half say severance terms are open to discussion. Recruiters and outplacement counselors describe the same pattern from the other side: the vast majority of employees sign the first version.

"Employers build room into the offer. They expect to be asked. The surprise is how rarely anyone asks." — a compensation consultant who has reviewed several hundred separation agreements

What is actually on the table

The weeks of pay get the attention, but they are only the first line of the agreement. Four other pieces routinely appear in it: health coverage, accrued vacation, outplacement support, and the treatment of money that has not landed yet — bonuses and equity, which deserve their own section below.

Before the negotiation, the employee handbook is worth a read. A growing number of employers maintain written severance policies — some promise a specific formula, others only a floor — and where a policy exists, the offer should match it. Human-resources staff are usually willing to share the policy on request; it is not a secret document, and asking for it is a reasonable first move that costs nothing.

Health coverage comes first because it is the most expensive item. COBRA lets a departing employee keep the employer's group plan for up to eighteen months, but the law does not require the employer to pay for it; the default is the full premium plus a 2 percent administrative charge. Many agreements include three to six months of subsidized coverage as a line item. If the offer does not mention it, that is a natural ask. The alternative is the full premium, which for a family plan can run $1,500 or more a month, on top of a paycheck that has just disappeared.

Accrued but unused vacation is a smaller line item, and in most states it is treated as earned wages that must be paid out regardless of what the agreement says. The agreement may nonetheless show a number lower than your records do, so the stub-by-stub check is worth the ten minutes. Outplacement — career coaching, resume help, and sometimes a few months of office space — costs the employer little next to pay, yet it is routinely offered only at the manager level and above. It is one of the easiest additions to secure for anyone below that line.

Typical severance norms reported by outplacement firms

Tenure	Weeks of pay
Under one year	1–2 weeks
1–5 years	2–5 weeks
5–10 years	5–10 weeks
10+ years	10–20 weeks
Executive roles	12–26 weeks

The clauses that outlast the paycheck

The release is the part most people skim, and it deserves the slowest read. Nearly every agreement includes a general release of claims: you give up the right to sue over the termination, the pay, discrimination, harassment, or anything else that happened during employment, in exchange for the severance. That trade is legal and standard. The questions are in the details.

Non-disparagement clauses — promises not to say negative things about the company — are standard and increasingly mutual; asking that they run both ways is a reasonable edit that employers usually grant. Confidentiality clauses covering the agreement's terms are common as well. The language to read carefully is the definition of disparagement and the list of people it covers. A version that includes current employees, former colleagues, and even family members is broader than most people realize, and it can quietly outlive the agreement's cash value.

Noncompete restrictions are now a legal patchwork. The Federal Trade Commission's 2024 rule banning most noncompetes was struck down by a federal court in Texas before it took effect, and enforcement today varies state by state. California, Minnesota, Oklahoma, and North Dakota ban them outright, while a growing list of states — Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Virginia, and Washington — restricts them heavily. What matters in a severance agreement is that a noncompete embedded in a release is still a contract term, and it is negotiable like any other. Several states now require that separated workers be paid during any noncompete period, which changes the economics of signing one.

Three more clauses are worth checking before the signature. A cooperation clause — agreeing to help with litigation or audits after you leave — is reasonable in scope, but it should have an end date and, ideally, a pay rate. Clawback language should state precisely what happens if the company later claims you violated the agreement. And the release itself should not cover claims that arise after the day you sign; the standard versions do not, but the standard versions are not the only versions in circulation.

Notice, WARN, and the timing of mass layoffs

Timing shapes leverage, and in a large layoff the clock may already be running against the employer. The federal Worker Adjustment and Retraining Notification Act requires employers with 100 or more employees to give 60 days' notice of a plant closing or mass layoff affecting 50 or more workers at a single site. Companies that skip the notice — and many do, paying workers in lieu of it — owe 60 days of back pay and benefits. For an employee caught in a large reduction, that obligation is context for the offer: the employer may already owe you two months of pay, and the agreement in front of you is being traded against it.

The WARN math rarely appears in the conversation. An employer offering four weeks of severance in a layoff that triggered the statute is effectively asking you to accept a fraction of what the law would provide. Employment lawyers who work these cases say the most common mistake in mass layoffs is treating the offer as the whole universe of what is owed, when in fact the federal notice rules, state equivalents in more than a dozen states, and the company's own past practice all belong in the picture.

COBRA, subsidies, and the cost of staying covered

COBRA's eighteen-month continuation window — twenty-nine months in some disability cases — is the floor of health coverage after a layoff, not the ceiling. The law requires the employer's plan to offer continuation, but at the full group rate plus 2 percent. The temporary federal subsidy that covered 65 percent of COBRA premiums during the pandemic expired in September 2021, so the cost is now the departing employee's unless the agreement covers it.

The comparison that matters is the one most people skip: marketplace plans on Healthcare.gov may be cheaper for someone with a newly reduced income, because premium tax credits are calculated from projected household income. A person laid off in January who earns little for the rest of the year can often find a silver plan for a fraction of the COBRA premium. The plan administrator has 14 days to send the COBRA election notice once it learns of the qualifying event, and you then have 60 days to elect — coverage runs retroactively to the day you left. That window means you can wait to see whether you need the coverage before paying for it.

Unemployment benefits are the other half of the income picture, and the interaction with severance varies sharply by state. Some states delay benefits until the severance period has run; others, including California, New York, and Pennsylvania, do not reduce benefits because of severance pay. The state workforce agency's rules determine which applies, and the answer is worth knowing before you agree to a payout structure, because the difference between a lump sum and weekly payments can shift the timing of your first unemployment check by months.

Equity, bonuses, and money that has not landed yet

For anyone holding stock options or restricted stock, the severance agreement is where equity terms get decided, and the stakes are often larger than the cash. A typical option plan gives a departing employee 90 days after termination to exercise vested options; plans vary, and the multi-year windows some companies adopted during the pandemic made longer periods more common. If you leave in a falling market, or simply cannot cover the exercise price and the taxes, that 90-day clock can destroy value that took years to vest.

Three equity asks show up in well-negotiated agreements: accelerated vesting of part of an unvested grant, an extended exercise window of a year or more, and a written statement of what happens to each grant, option by option. For restricted stock units, the question is whether unvested units are forfeited outright or whether the company will credit some service. None of this is automatic. It is all contract language, which is why the equity exhibits deserve the same scrutiny as the cash pages.

Bonuses belong in the same category. A bonus that was earned but unpaid at termination is generally owed, though the agreement may try to characterize it as discretionary. A prorated bonus for the current year is a genuine negotiation point, and many companies grant one in exchange for a smooth transition. Ask explicitly whether the agreement covers it, because silence means you are betting on the company's goodwill after you have signed away your leverage.

What to ask in the first conversation

The first conversation sets the frame, and it should happen before anything is signed. The essentials, in order: the number of weeks, anchored to your tenure and the norms above; the length of benefits continuation; the treatment of equity; the payout of accrued vacation; and the date of the final paycheck. Then the clauses: mutual non-disparagement, a noncompete that is waived or paid, a release that does not cover future claims, and a cooperation clause with a time limit.

The phrasing matters less than the fact of the ask. A direct, low-emotion sentence — "I'd like to discuss the terms before I sign; can we talk about the number of weeks and the benefits continuation?" — is enough to open the door. Outplacement counselors report that even a single counter-request succeeds more often than not, because the employer has already budgeted a range, and the incremental cost of the final offer is small next to the legal and reputational cost of a dispute.

One more item belongs in that first conversation: the reference. A written commitment about what the company will say to prospective employers, and who will say it, is worth more than most people assume. Employers routinely agree to confirm dates of employment and title, but a specific line about performance — "eligible for rehire" is the classic — can be negotiated into the agreement when the relationship ended badly. As with everything else, it belongs in writing.

Two tactical details. First, get everything in writing; verbal promises about vesting or references do not survive the signature. Second, ask for time. If you are 40 or older, the Older Workers Benefit Protection Act gives you 21 days to consider the agreement and 7 days to revoke after signing, and employers routinely grant extensions to anyone who asks, because the alternative is litigation risk.

The lawyer, the taxes, and the signature

The decision framework is simple in principle: weigh the offer against what you are owed by law, what the norms suggest, and what a dispute would realistically cost. The WARN obligations belong in the first column, the norms in the second. On the third, one hour with an employment lawyer — a few hundred dollars — is cheap insurance on an agreement that waives claims you cannot yet see. Lawyers who do this work say most severance reviews are quick; the value is in knowing which clauses are standard and which are overreach.

The unglamorous details matter too. Severance pay is taxable wages, and the IRS treats it as supplemental income, which means withholding at the 22 percent flat rate is common even though your actual tax bill may be higher or lower. Plan the lump sum's tax consequences before it lands. Confirm how the final paycheck is delivered, when the COBRA paperwork arrives, and whether the outplacement benefit carries a deadline. Each of those answers belongs in writing.

What the data suggest is coming

The direction of travel favors employees on paper. State-level restrictions on noncompetes keep spreading, more states are adding paid-notice requirements for large layoffs, and pay-transparency laws are pushing employers to publish salary ranges — a discipline that is beginning to reach severance policies at larger companies. A few employers now post their separation terms on internal sites, and the effect is what transparency usually produces: narrower gaps between the first offer and the final one.

What you can do with this before the conversation is straightforward. Run the numbers first — a few minutes with a salary calculator is enough to know what a week of pay is worth to you, and the norms above give you the anchor. Ask in the first call, in the plain sentence quoted earlier. And treat the agreement as the opening position it is: an offer drafted by the company's lawyers, priced against the risk that you might ask. The evidence from the people who review these documents for a living is that most employers have already decided what they will say yes to. The only question is whether you ever ask.