How to negotiate severance pay with a departing employee

| Nov 16, 2020 | Employee Pay |

When it’s time to let an employee go, regardless of the reason, you must consider the financial and legal implications of doing so. In many cases, this means a clear understanding of severance pay, how it’s calculated and whether or not the employee should receive it.

If you’re in the process of negotiating severance pay with a departing employee, here are some things to consider:

  • The reason for their departure: For example, if you had to terminate the employee as a result of sexual harassment or discrimination, you can argue that they should not receive any severance they may otherwise have been in line to receive.
  • The employment contract: Before you do anything with regard to termination and severance negotiation, review the employee’s contract for a better understanding of its terms and conditions. If it states that you’ll pay them severance upon leaving the company, find out if their current situation qualifies.
  • There’s more to think about than money: There’s a good chance that your former employee will focus entirely on salary and bonuses, but you shouldn’t stop there. You can negotiate many other things, including but not limited to benefits and paying for vacation days and sick days.

Along with the above, it’s important to note that this process doesn’t always unfold quickly. It can take a while to work through the details and find common ground.

The best way to prepare for a severance package negotiation is to fully understand your legal rights and obligations, along with the terms and conditions of the employment contract. You should also review your employee handbook for any language associated with severance pay.

In a perfect world, you’d be able to quickly reach a mutually agreeable severance package with all departing employees who qualify.

However, as you know, things don’t always work out this way. And that’s particularly true if there is “bad blood” between you and the employee, such as the result of a layoff.

The way you negotiate severance pay with one employee won’t be the same as the next, but there are definitive steps you can take to position yourself for success.