Day 12 — Aim for All-Cash Deal

Untangling your relationship with your former employer can take several weeks, if not months, if you don’t roll over and do what the HR person says, which is to sign the severance agreement right away because, after all, the package is so generous, how could you possibly turn it down?

Actually, they want to get rid of you as fast as you want to get rid of them, even if you feel they’ve done you wrong. Chances are, they’ll tell you to have a lawyer look over the agreement before you sign it. They’re not telling you this to be nice; it’s the law.

That is probably the best advice they’ll give you, and they probably don’t think you’ll actually follow through, because if you did, you’d find out how horrible they are treating you. I understand, you want to take the money and run. But don’t let your former employer trample you like the Next Top Model tryout. While you might think it’s great that they’ve offered to pay your COBRA health insurance benefits for a year, which is a common benefit in severance agreements, it’s not such a great deal if you take the time to analyze this benefit the way lawyers do. COBRA is temporary insurance that employers are obligated to offer you after termination.

If you leave voluntarily, it is up to you, not your former employer, to pay the premiums, which are priced at group rates, making them lower than if you had to take out a new health insurance policy. In a severance agreement, your employer may offer to pay your COBRA premiums for up to a year, which is a benefit for as long as you remain unemployed. Once you find another job that offers health insurance and take it, the benefit stops, so it’s not that big of a benefit if you’re lucky enough to find a job in, say, three months. It would be better if you could negotiate an all-cash settlement that would equal a year’s worth of COBRA benefits.

This amount would be in addition to what your company believes you’re worth for your length of service, which isn’t very much. That amount varies, but it’s probably somewhere in the neighborhood of one or two weeks’ pay for every year of service. As we know from reading about golden parachutes, chief executives receive obscene amounts.  If you want more, don’t ask. Get a lawyer to ask for you. Your employer is not going to give you more because you asked nicely.

Another benefit in most severance packages is payment for out-placement counseling. From what my lawyer told me, this benefit is only worth about 50 cents on the dollar since most people don’t take advantage of it. Again, if you can get this amount, which should be about $4,000 to be worthwhile, paid directly to you as part of an all-cash settlement, so much the better.

You also hear that if you try to negotiate your severance, your employer will yank the agreement altogether leaving you high and dry. While that is technically true, employers don’t want to put themselves in a position of getting sued, which this behavior would leave them. They want you to sign the agreement, which will also contain clauses that require you to promise not to bad mouth them. Make sure the clauses are reciprocal. You don’t want them trashing you when a prospective employer asks to speak to your former employer for a reference.

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