Frequently Asked Questions About Severance

Here are some frequently asked questions about severance, and the answers to those questions. Q1. Will I be blackballed if I ask for/negotiate my severance?

A. While it is possible, being blackballed simply for seeking to improve your situation is not plausible. In all of my years of practice, I have never seen it happen. Think about your field, chances are you do not know anyone who has been blackballed. It does not happen very often. On the flipside, severance negotiations happen all the time. The whole point of a severance agreement is for both sides (the employer and the employee) to move on amicably. If you approach severance negotiations in good faith and without resorting to threats, bombast or nonsense, there should be no ill will created by virtue of negotiating.

Q2. If I try to negotiate my severance, will my employer take back the original offer?

A. This is similar to the answer above. It is possible but not plausible. Your employer made a severance offer in exchange for something (typically a promise not to sue the employer), if they take that back, they are basically forcing your hand. If the offer was made in good faith, it will almost certainly not be retracted simply because you asked for more.

Q3. Am I entitled to benefits with my severance?

A. It depends on the agreement. Depending on how your severance is structured, you may be entitled to continued benefits. This is why it is critical for all employees entering into severance negotiations to prioritize what they hope to achieve.  Continued benefits are more valuable to some employees than others.

Q4. How will my severance agreement be taxed?

A. Only two things in life are certain, and one of them is taxes. Regardless of when severance is paid, or what it is called, the IRS treats severance like any other form of wages and taxes it as such. Thus, severance payments are subject to withholding and employment taxes.

Q5. How much severance should I expect?

A. Unless you have a contract that provides for severance, you have no entitlement to severance. However, you can do two common sense things to educate yourself about what to expect. First, there may be a company policy about severance – take a look at your employee handbook, offer letter, etc. Second, you can ask around – although severance agreements are typically confidential, you might still be able to find out what other employees received. Be careful with the second category of information, though. Not all severances are created equal. The most important, factor in calculating your expected severance is your leverage. For more information on sources of leverage in severance negotiations, click here.