Understanding What is a Reasonable Severance Package
Deciphering Reasonable Severance Packages: A GuideOne of the most common questions we encounter is, "What constitutes a reasonable severance package?" Answering this query is no easy task due to the absence of legal requirements for severance payments. The nature of your severance is often intertwined with potential legal claims against your employer, making it a complex matter to address.
Further, there really is no such thing as a "typical severance package." Larger employers often have severance policies that track what they believe to be average in their industry. Smaller employers often have no severance policy at all and only address it on a case by case basis, if they offer severance at all. While pinpointing a universally reasonable severance amount remains elusive, insight into typical employer practices can assist you in making informed decisions about your severance package or navigating negotiations effectively. Is There an Existing Severance Policy at Your Workplace?A 2020 study by LHH revealed a growing trend among companies, with over 70% reporting formal severance policies for senior positions such as C-suite roles, managing directors, VPs, and managers. Approximately 51% of these companies possessed formal severance plan documents, while others relied on written guidelines or oral communications to convey their severance policies.
Larger companies are more likely to have documented severance policies. If you lack access to this information, your Human Resources department should be able to assist you in obtaining it. Understanding the policies can serve as a foundation for assessing whether your offered severance aligns with your company's typical standards. What Severance Packages Are Typically Offered?Severance packages can vary considerably. The 2020 LHH study revealed that severance based on a fixed number of weeks ranged from 12.4 to 15.2 weeks for non-managerial employees and 15.4 to 21.9 weeks for management roles, including CEOs. For severance based on weeks per year of service, most offered 1-4 weeks per year for non-managerial employees, with greater variation for management positions, including CEOs.
Many employers establish caps on "years of service" severance, either as a fixed amount or a specific number of years. Surprisingly, a significant portion of employers, ranging from 61% for non-exempt (usually hourly) employees to 25% for CEOs, do not have severance policies in place. Crucially, 75% of respondents who provided severance packages required employees to sign legal claims releases in exchange for the severance. Does the Employer Have to Adhere to Its Severance Policies?Specific severance policies outlined in employment agreements legally bind the employer. However, these agreements often include conditions for receiving severance, particularly related to termination with or without cause.
For others not covered by explicit severance agreements, employers typically have discretion in offering severance, allowing for adjustments based on unique circumstances. Despite this flexibility, these policies offer valuable insights for evaluating your severance package and advocating for improvements. If you suspect legitimate legal claims against your employer, these policies can serve as a baseline. Conversely, if your offer falls below the company's customary standards, it can be a basis for negotiation. |
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Meet Our Employment Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year. She has written a book on employment law: Rules of the Road, What You Need to Know About Employment Laws in Massachusetts, and helped thousands of clients on both the employee and employer side with severance and non compete review and negotiation, wage and hour, discrimination and retaliation disputes, workplace sexual harassment situations, and advice about employment law generally.
Rebecca Rogers: Rebecca is a 2006 graduate of Boston College Law School, and has worked with slnlaw since 2013. She previously worked as an intellectual property litigation attorney for Fish & Richardson in Boston, Massachusetts, and clerked for the Massachusetts Supreme Judicial Court. Rebecca has helped clients with wage and hour disputes, employment discrimination, harassment and retaliation claims, review and negotiation of severance and non compete agreements, and advice to both employees and employers about navigating complex employment situations.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna has helped clients with review and negotiation of severance and non compete agreements, wage and hour disputes, discrimination, harassment and retaliation claims, and advice to small business owners about employment law and other business matters.
Elijah Bresley: Eli is a 2014 graduate of Seton Hall Law school, and has worked with slnlaw since 2020. He previously worked for a boutique employment law firm outside of Boston, and then for the Labor and Employment department of a large Boston firm. He also spent a year clerking for the judges of the Superior Court in Hartford, Connecticut. Eli has helped clients on the employee and employer side with all varieties of employment law issues, including employment discrimination, harassment, retaliation, and wage and hour issues, litigation in MCAD and state and federal courts, and advising employers about employment policies and practices.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped clients with wage and hour, discrimination, harassment and retaliation disputes, review and negotiation of severance agreements, and litigation in MCAD and state and federal courts on employment related issues.
How We Can Help
The averages across industries are usually less helpful in understanding the value of your severance package than experienced legal advice about what claims you might be giving up. We can help with that analysis, as well as with severance negotiations if you choose to go that route. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
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