Don't set sail without shoring up your severance package

Severance never has been a simple subject.

The intricacies linked with parting packages vary from the financially significant (CEOs have sued former firms for hefty unpaid bonuses) to the more common (laid-off friends and family berate themselves for not asking for more money, a reference — or even that e-mail contact list — before signing off on a termination agreement).

Like estate planning, severance is a topic few want to think about. But layoffs and buyouts abound these days, so it's vitally important to devise severance-talk tactics.

"If you're prepared for the discussion, it goes dramatically differently than if you say, 'I'm never going to be laid off.' But then it happens, and then you're stunned and can't think straight," says Maury Hanigan, founder of Layoff Coach (

Adding to the troubles of laid-off workers: Many employers are doling out smaller packages.

"Companies are becoming far less generous with their severance," says Hanigan. "They are finding reasons to reduce severance or make it harder to qualify."

The reason is simple: to cut costs.

One in five companies planned to make future changes to their severance programs, according to a survey, released in March, by consulting firm Hewitt Associates. Of those making adjustments, 43% expect to reduce cash payments, and 21% plan other severance cutbacks.

Real estate development firm Geonerco Management, in Seattle, revamped its severance practice late last year. It didn't have a formal written policy, but prior to December, it gave two weeks' pay for the first year of service, and then a week for each complete year after that, says Greg Szymanski, human resources director. But as business continued to deteriorate, the company provided just two weeks' pay in its most recent layoff round.

Citigroup employees who had a decade or more of experience also lost some severance pay because of a policy change at the financial giant. U.S.-based employees who lost their jobs at the beginning of this year were no longer able to get a "supplemental severance payment" that would add extra money to their parting packages.

Some companies have even turned to variations of severance programs that have roots in the 1950s, so-called supplemental unemployment benefit pay plans. In such plans, employees must qualify for state unemployment to get their parting payouts from the company. In some variations, companies pay the difference between unemployment benefits and the prior salary until the employee reaches the maximum number of weeks he or she can get based on years of company service. If an employee finds a job during that time, all payments would end.

Caterpillar and Gannett, the parent company of USA TODAY, are two firms that have recently used versions of the plan.

To get the best severance deal, employment experts say, it's essential that workers determine their needs and fight for what they want.

Of course, that aggression can go a bit too far: Workers at a French construction equipment plant recently grabbed headlines when they threatened to blow up machinery if they didn't get increased severance packages. Experts suggest following these tips instead:

•Be realistic. Even the best negotiators aren't likely to see a huge increase in cash come their way. "The amount of severance pay you get is generally determined by policy and generally not negotiable," says Hanigan. Yet, workers should still think broadly and creatively about what they want, and how to get it, she says.

•Sweat the small stuff. Fight for every dollar of vacation pay and pending year-end bonuses — and see if you can get any credit for partial years worked, says Beth Kobliner, author of Get a Financial Life. "The sad reality is that you may be unemployed for much longer than you thought," she says. In June, three in 10 unemployed people were jobless for 27 weeks or more, according to the Bureau of Labor Statistics.

•Pad your retirement. Workers close to vesting in any company retirement plan should ask if there is any wiggle room to help them be vested, such as staying on the payroll until vesting is official. "Pay attention to things like your 401(k)," Kobliner says.

•Be materialistic. "Think about the entire package, things like negotiating to keep a laptop or cellphone," says Hanigan. In the case of mobile devices, "You'd have to transfer the contract and pay the monthly service," she says. "But still, you don't want to cough up $100 for a new BlackBerry if you're out of work." She knows of one person who asked to keep a company car and got it.

•Prop up your ego. Ask managers for letters of recommendation or even a virtual recommendation on social-networking sites such as LinkedIn, suggests Geonerco's Szymanski. He says those testimonials can be extremely helpful for job seekers — and can be more valuable than getting a bit more money.

•Call in the backups. Ask a spouse, friend or even a financially savvy cousin to check the termination agreement before signing anything. "Having a second set of eyes look at the documents is usually a good thing," Hanigan says.

•Be appreciative. Most companies don't have to offer anything. So fight the good fight, then when it's over, be thankful for anything that you've gotten. "Some people have individual employment contracts, but there is no nationwide law that says people have to get a dime for severance," Hanigan says.

Bob Cartwright, CEO of Intelligent Compensation and a member of the compensation, benefits and total rewards expertise panel for the Society for Human Resource Management, adds that being polite will often get you more in the end.

"You can attract more with honey than you can with spite," he says.