The recruiter has just told you that you were the top candidate for a role you’ve interviewed for - and the company is going to make you an offer. Enjoy the feeling, because you’ve earned it! Interviewing is competitive and stressful, and even in a “hot” job market there are usually multiple candidates for any job position.
Once you have a written offer in hand, you suddenly have a lot of leverage. Maybe you want to negotiate a different start date, or perhaps you want the company to offer you a sign-on bonus as the “tie-breaker” to get you to sign their offer and not the other company’s offer. Either way, once you receive the offer, you are in a unique position to ask for a few tweaks before you sign. In some cases, it even makes sense to ask for a severance clause in your offer letter when joining a new firm. Let’s look at some of these situations:
Mergers & Acquisitions. If you are joining a company that has recently been acquired or merged, or has announced a pending merger or acquisition, you should definitely ask for a severance clause in your offer letter. For example, if you have been offered a job at a small private company that has been in the news lately for being acquired by a larger public company, you are taking on a lot of risk. If the merger/acquisition has been announced publicly, but has not yet closed (i.e. officially finalized), you run the possibility that the company you join will be fully merged into the larger company within 30-60 days. Subsequently, they may decide to lay people off who are in “redundant” positions. One way to include a severance clause as security against job loss as a result of an acquisition is to ask for a “double trigger” termination clause. Double trigger simply means two events have to happen for you to receive whatever benefit is included in the clause: 1) Your company is involved a change of control/acquisition, and 2) As a result of the change in control you are terminated (usually within some period such as 90-180 days from the date of the acquisition closing). Many “double trigger” clauses provide for full acceleration of unvested stock options, but may also include items like severance pay or some form of pro-rated bonus.
Lay-offs, Outsourcing, & Downsizing. If you’ve been terminated more than once, whether by layoff, downsizing, outsourcing, or other type of sudden no-fault job loss, you have every reason to ask for a severance clause in your offer letter. Similarly, if you are in an industry with lots of churn (such as semiconductor, domestic manufacturing, etc.), a severance clause is a reasonable request. Obviously, you might not want to bring up the issue of termination when you just receive the offer, but in certain situations, you should talk with your hiring manager about including a termination clause including severance. Simply explain your concerns about previous layoffs that have affected you, and make it clear that you are only trying to provide some insurance for yourself and your family, in the event that the company decides to end your employment (not “for cause” or for performance). The company may or may not be willing to include such a clause, but the time to inquire is before you sign.
Executive positions. For executive (loosely defined as any position with Vice President (VP) or above title) offer letters or employment contracts, severance clauses are very common, and you should insist on one. Higher-level jobs pay more and provide better overall earnings opportunities. However, because there are fewer of these jobs, they are very competitive, and thus harder to land. While the amount of severance offered in termination clauses varies considerably based on company size, title/level of the job, and industry, a good rule of thumb for an executive severance clause is a minimum of 3 months, and up to as much as 12 months of severance pay. Some companies pay even more; I know one person who worked at a private company for over 20 years, and when his role was eliminated, he was given a severance package that included full pay with benefits for two years. C-level roles in large public companies (such as CEO or CFO roles) often get multi-million dollar severance packages (otherwise known as golden parachutes).
Company –sponsored relocation. Another time when a severance clause is important is if your company is relocating you from one location to another. Relocation for a stellar job opportunity is a great way to advance your career, but if you move yourself and your family and then 3 months after you have moved, the company you just joined gets acquired - or goes bust - you may find yourself in a new place without a job and no support network. If the company initiates a termination for any reason other than “for cause,” you should be protected with severance and/or an agreement to relocate you back to your original location so that you aren’t left holding the bag. Being in a new place with few contacts, and the potential disruptions of school for your kids, or your spouse’s job, is more than enough reason for you to get a termination clause with relocation benefits.
How much should I ask for? If you decide to ask for a termination severance clause, ask the company what their policy is for “not for cause” severance. They may pay a minimum baseline of 2-4 weeks pay as severance, and then use some formula based on length of service, pay rate, or title that adds additional severance to the baseline. If the company doesn’t have a severance policy or won’t share it with you, ask for a minimum of two months pay (unless you are an executive as outlined above) and see where the negotiation goes from there. They don’t have to honor your request, but like they say, if you don’t try, you have a 100% chance of failure.
Far too many people get offer letters, and then don’t negotiate any beneficial terms in spite of the substantial leverage they have before they sign. Use that leverage to your advantage to get extra benefits, because once you sign the letter, you’ve just joined the queue with all the other employees in the company who are waiting for their next pay increase or promotion.