What Is a Severance Package?

Severance packages are typically offered to employees upon being laid off or fired.

This “package” may include a combination of various benefits and pay, such as:

• Continued payment of your regular salary
• A lump sum payout
• Payout for unused sick or vacation days
• Payment or expedited vesting of stock options

Severance packages are essentially meant to lessen the blow of an involuntary termination, but they are also often used by employers to avoid a potential lawsuit in the future.

What Are Common Severance Packages Offered by New Jersey Employers?

No two cases are alike when it comes to severance packages, and each case requires very individualized attention. There is no “rule” or “book” you can consult that lists what is a “fair” severance package. However, there are certain benefits that will typically be included in severance packages.

Some benefits commonly included in severance packages include:

• Salary continuation or severance pay. Employers may base the amount of severance pay they offer by considering the number of years spent in a position at the company. Some employers offer one to two weeks of pay for every year the employee has spent in their service.
• Unused time off payments. Some companies may offer payment for any unused paid vacation days or sick leave.
• Insurance benefits. Employers are generally required by law to offer a terminated employee health insurance continuation in the form of COBRA benefits, which require you, as a former employee, to pick up the full cost of continuing your insurance. Often, when we negotiate a severance package for a client, we will seek to have the employer pick up the cost of the continued health insurance benefits.
• Outplacement services. These services provide the terminated employee with assistance in finding a new job or allow for time-off flexibility so they can apply and/or interview for new jobs.
• This part of the agreement provides all information that may be disclosed to any future employers.
• Uncontested unemployment benefits. Such a provision will state that the employer agrees not to contest or challenge an employee’s potential application for unemployment benefits.

Why You Need an Employment Lawyer for Your Severance Package

There are several things that you must consider when deciding whether to sign a severance agreement or reject it. To begin, you should understand that the severance agreement was written to protect your employer’s interests, not yours.

Second, you need to understand that typically in return for whatever amount of severance pay being offered, your employer will require that you release all potential legal claims you may have against them. This is one of the key reasons why getting legal advice is a very good idea before (not after!) you sign the agreement.

Often there is the possibility of severance package negotiation. Before engaging in a negotiation, it is important for you and your lawyer to determine whether or not you have any real leverage to apply in negotiations.

The strongest leverage you may have is your potential legal claim against the employer: the stronger the claim, the greater the leverage. But legal leverage is not the only form of leverage you may be able to bring to bear, as there may be other “buttons” of the employer that you can push that can be useful in negotiating more in the way of severance.

Speak with Our Experienced Severance Package Lawyer Today

The team at Schall & Barasch LLC has negotiated hundreds of severance packages for their clients over the years. In many of these cases, they were able to negotiate substantial severance package benefits where none had been offered or otherwise greatly enhanced the amount of severance pay that was initially presented.