5 Ways to Nab a Better Severance Package

Updated on April 10, 2009.

Getting handed the pink slip has become an all-too-common occurrence these days. The jobless rate reached 8.5% in March -- a 25-year high, according to the Labor Department -- and economists aren’t anticipating those figures to peak anytime soon.

Numbers like that not only mean it 's tougher to find a job, but also that -- should you lose yours -- whatever income you have has to last longer. One way to ensure you're covered is to start negotiating for a better severance deal as soon as the boss soberly calls you into his office.

Workers often sign their severance agreements immediately, out of fear or a sense of powerlessness, says Alan Sklover, an employment attorney at Sklover, Donath & Felber. But like any business transaction, these packages are negotiable. Reducing a work force is an expensive undertaking and companies create a budget just for that purpose. They also tend to put aside reserve funds for unexpected issues or events, says Sklover. “Ninety-nine percent of the time there’s some money left over for people who ask for it,” he says.

While companies aren't obliged to offer severance packages, many do. According to a survey by consulting firm Watson Wyatt conducted in February, of the 52% of companies that had layoffs, 29% offered enhanced severance benefits, including extended pay, health coverage and job search assistance. Some companies even let ex-employees keep their laptops.

Want to get all you can out of your former employer? Follow these tips to help you negotiate the best severance deal.

Unless you have the ear of top human resources manager, it’s probably best to skip that department when hammering out severance terms, says Sklover. “Their job is to get you out quick, quiet and cheap. You should [talk] to someone who has the authority to tell HR what to do,” he says. That could be your boss, head of your division or even the CEO.

Resist the urge to run out of the office the minute you receive the bad news. In fact, try to postpone your departure for as long as possible. Not only does staying employed make you more attractive to prospective employers, but the extra few weeks' worth of paychecks will help you get by longer.

Say you’re in the midst of a project that will take another two months to finish. Ask your boss if you can stay on until the project is completed. Explain to her in writing the tasks you’re working on and the risks to the business if it’s put on hold, says Bill Belknap, a career coach with the Five O’Clock Club, a coaching and outplacement service.

If you don't succeed in extending your time in the office, then ask that your health benefits be maintained through the time you're being paid severance -- or perhaps even longer. So, if you receive three months’ of severance pay, request that your health coverage also last three more months. Doing so could save you plenty of money. The average Cobra premium costs $388 a month for individuals and $1,069 for families, according to Families USA, a health care nonprofit. (Note that the recently passed Stimulus Act provides a 65% subsidy to help unemployed workers afford Cobra, which will lower those premiums to $135 and $375 a month, respectively.)

Should you get laid off just a matter of months before your stock options vest or bonuses are doled out, ask for those perks now. Request that your employer expedite the vesting of your options or at least prorate the bonus plan so you can receive what you're due, says Andrew Milne, an employment attorney with Garson Claxton.

Can you provide a vital service that your employer will require down the road? If the company needs you to close a deal or meet with a client, make yourself available on a freelance or consulting basis, says Belknap. Not only will the company avoid having to train someone for your old job, but it will also save money (after all, they won't be paying for all your benefits or your full salary). Meanwhile, you have a stream of income -- albeit a diminished one.

If you were one of many companywide layoffs, your employer is required to give you advance notice under the federal WARN Act, or the Worker Adjustment and Retraining Notification Act. WARN requires employers with 100 or more employees to give 60 days notice before closing a plant or engaging in a mass layoff, or they will have to pay dislocated workers 60 days of wages and benefits. If employers give only 30 days notice, they must pay 30 days severance.

Some states, including Wisconsin, Illinois and California, have adopted their own beefed-up versions of the regulation. New York, for example, increased the notice employers must give workers to 90 days from 60. It also made the law applicable to firms that lay off 25 employees, compared with the previous minimum of 50.

How do you know if you and your company qualify? Your state’s employment office should be able to tell you, and some state bar associations and law school clinics offer free advice as well, says Rick McHugh, staff attorney at the National Employment Law Project, a worker advocacy group.

Readers: Do you have a severance story to share or a question to ask? Email us at ask@smartmoney.com.