Severance package: what it is and how to negotiate it
By Justin KullaLast updated
What a severance package usually includes
- Severance pay, often calculated from years of service. One to two weeks of pay per year is a common formula, but it varies widely by employer and level.
- Health coverage: a subsidy toward COBRA premiums for some number of months.
- Payout of unused vacation or paid time off, where state law or company policy provides it.
- Treatment of bonuses, unvested equity and retirement plan matches.
- Outplacement or job search help, and an agreed reference or announcement wording.
What you can negotiate
Employers expect questions about an offer, especially when it asks you to release legal claims. The items people most often ask for are a longer pay period, more months of health coverage, a bonus or equity vest that is close to paying out, a narrower non-compete, and agreed wording for references and for how your departure is described.
Ask in writing, ask for the whole agreement before the deadline, and ask for any extra time you need. Workers 40 and older who are asked to sign a release under the federal Older Workers Benefit Protection Act generally get at least 21 days to consider it (45 days in a group layoff) and 7 days to revoke after signing.
Severance, unemployment and health insurance
Whether severance reduces unemployment benefits depends on the state. Some states count severance as income for the weeks it covers and some do not. Our state pages show how each state treats it, and when to file.
Your COBRA election window is 60 days from the date you lose coverage or get the notice, whichever is later, and coverage is retroactive once elected. Compare it with marketplace plans before you choose.
Frequently asked questions
Is an employer required to give severance?
Generally not. Federal law does not require severance pay. It can be required by an employment contract, a union agreement, a company plan, or in some mass layoffs by the terms the employer chooses to offer.
Does severance affect unemployment benefits?
In some states, yes. Some count severance as income and delay or reduce benefits for the weeks it covers; others do not. Check your state’s page, and file for unemployment right away either way.
Can I negotiate a severance offer?
Yes. Offers are often negotiable, particularly the amount, months of health coverage, timing of bonus or equity, and reference wording. Ask in writing before the deadline on the agreement.
How long do I have to sign a severance agreement?
It is set by the agreement. For workers 40 and older signing a release, federal law generally requires at least 21 days to consider it (45 in a group layoff) and 7 days to revoke.
Plan the first weeks after a layoff
Get a free Market Reality Assessment and a weekly plan that starts with the deadlines: unemployment, health coverage, references.
Get my free assessment