Since negotiating my own severance in 2012 at the age of 34, I've consulted with several dozen individuals about how to best negotiate a severance as well. In addition, thousands of people have read my bestselling ebook, How To Engineer Your Layoff, and negotiated their own severances as well. This article will talk about how to negotiate a severance as a high-performing employee.
Most high-performing employees feel like an employer would never offer them a severance. Why would they when they are doing so well and adding so much value to their employer. In reality, high-performing employees have an even easier time obtaining a severance package compared to low-performing employees.
Although I've taken a hiatus on personal finance 1X1 consulting since the birth of our son in 2017 and our daughter in 2019, I can't help but think of my favorite severance negotiation consultation: my wife's.
You're Supposed To Be A High-Performing Employee
My wife is three years younger than me. Therefore, when I negotiated my severance in 2012, I told her that if everything worked out with early retirement on my end, she too, could join me. Hooray for equality!
One of the most common questions I get from people who haven't bought my bestselling severance negotiation book is: why would a company ever give a high performing employee a severance? Most employees think they are invaluable workers who somehow don't think they can be easily replaced. Hint: we're all replaceable!
Hopefully with my wife's severance negotiation example, I can convince some of you it's possible. I've already published a guest post from a client who shared his successful severance negotiation strategy. He had been with his firm for over a decade and was also a high performer.
How To Negotiate A Severance As A High-Performing Employee
For the last two years of my wife's 9.5-year career with one firm, I felt she was underpaid and overworked. I told her she should be more aggressive in asking for a raise and a promotion. But every time I brought up the subject she said she didn't want to be too pushy.
Her style is very different from mine when I was working. I always kept track of how much my competitors at other firms were getting paid for what they were doing.
Whenever I felt my compensation had fallen behind by more than 10%, I would sit my managers down for a heart-to-heart and make sure they were aware of my concerns.
When it was time for her to get promoted in early 2014 she was passed over for two guys. One guy constantly slacked. The other guy always talked about how unsatisfied he was at the firm. Both of them were a year or two older than my wife, but my wife had the same amount of experience.
My wife was finally pissed off enough to realize the importance of self-advocacy. She had naively believed if she did good work, her bosses would always reward her efforts.
Important lesson if you are unsure about leaving work:
The longer you stay at one firm, the more you will be taken for granted. A boss's favorite employee is one who never complains and never speaks up about getting paid or promoted. The less your boss can pay you, the better s/he looks.
No longer was my wife willing to stay late and deal with PITA clients. She finally asked me to help her come up with a plan to negotiate a severance. Ah, music to my ears!
At least, my wife was willing to follow the second rule of FIRE, a movement I kickstarted in 2009 when I started Financial Samurai.
Formulating The Severance Plan
During the year she was passed over for promotion, Financial Samurai was earning enough money to support the both of us. She was turning 34 and we agreed that it would be nice if she joined me in early retirement. After all, I was also 34 when I left work, so it seemed only fair she did the same.
High Performer, Long-Term Employee
We reviewed various severance negotiation case studies, and chose the archetype that best fit her: female high performer, long-term employee, large private firm, got a long with her managers, the company would sorely miss her services.
5 Step Action Plan To Negotiate A Severance As A High-Performer
Step #1 To Negotiating A Severance: Know Your Worth
The most important thing I did to help my wife was to make her KNOW HER WORTH. She didn't want to entertain other job offers because after 9.5 years, she felt loyal to her firm.
If she was absolutely truthful, she would also admit that she enjoyed the routine. Once she understood what her market value was, she began to get aggressive. Calculate how much money your employer believes you are worth each year. That figure is your bargaining chip.
Step #2 To Negotiating A Severance: Set Clear Expectations
She requested a meeting with her bosses to express her disappointment and implied that if they did not promote her mid-year, she was gone. Her bosses were surprised, which is a bad thing because she hadn't properly managed their expectations. But now, her feelings were out in the open.
She played chicken with her firm, knowing they would swerve in the final seconds because she was the point person for several major clients. Nobody else had the relationships and nobody else could do what she could do. If she left, they were screwed by more than 10X her salary in lost revenue.
Six months later they agreed to promote her and give her a 20% raise. Excellent. Better late than never. Management realized their mistake and were quite apologetic.
During this time, Financial Samurai grew by another 50%, giving both of us even more confidence that she could walk away and never return. But of course, I never recommend anybody quit their job, especially after almost 10 years of service. A severance had to be negotiated!
Step #3 To Negotiating A Severance: Get To A Point Where Regret Disappears
We went over in detail how she felt after she got promoted. Her response, “Satisfaction. I feel great knowing that I got what I deserved.”
When I asked her what about getting to that next level of promotion she said, “I have zero desire to go through the stress my boss goes through every day. I can leave this stressful, unhappy place without any regrets.”
Alrighty then! She was now in a very powerful position of having nothing for her to lose.
Step #4 To Negotiating A Severance: Stand Firm On Your Demands
It was now time to make the move. Five months after her promotion (11 months after she was first passed over), she walked into her boss's office and asked for a severance equal to what some recent employees had gotten when their department shut down. Her managers balked, as expected, given she had recently gotten promoted and was an excellent performer.
A couple weeks went by before they realized my wife was serious about leaving. Her heart was no longer into the job and they realized something had to be done.
They knew they had messed up by not promoting her earlier in the year. At the same time, the needed to keep her.
Millions of dollars in revenue and months of lost productivity was at stake if they lost her. It would take months for them just to find and train her replacement.
They had another meeting about what they could do to make her happy. They implied she would get another 20% raise in the new year. My wife told them there was nothing they could do.
Even a 50% raise wasn't going to keep her motivated because she no longer enjoyed the work and didn't fully trust management to promote people based on a meritocracy. She reiterated she wanted a severance, and they told her they'd get back to her in a week.
Initial Severance Offer
A week passed, and they had another meeting. All this while, my wife continued to come in on time, but leave right when the clock struck 5pm.
She was always courteous to her colleagues, but she never put in more effort than expected. After years of doing more than expected, just doing the normal felt off. Good behavior during the severance negotiation process is important.
Management decided it was best to pay her a severance and arrange some type of long-term transition so that everybody wins. Having someone in a seat who doesn't want to be there would bring morale down.
Here's what they initially came back with:
- Three months base salary (the actual severance lump sum payment).
- All her unused vacation days paid (required by state law).
- Six months of free health insurance.
- Stay for six more months full-time.
After 9.5 years of working at her firm, I knew their proposal was WEAK SAUCE. She should have gotten at least two weeks of pay per year worked as part of the exit package.
We tried our best to negotiate a higher severance lump sum, but she was working at a private company that was on the decline. They refused. They said they were handcuffed by headquarters.
Step #5 To Negotiating A Severance: Come Up With A Win-Win Solution
The only logical next step was to get creative. This step is where many severance negotiators fail.
Given her firm wouldn't budge on the lump sum severance payment, we proposed a compromise for the remaining six months of full-time work requested.
Instead of coming in five days a week, we went back and said she'd be willing to come in two days a week and work from home one day a week. Further, she requested to no longer be client-facing, which was the main stressor of her job. During this time, she would train other people to fully take over her job and get paid her FULL salary.
They Said Yes To My Severance Counter Proposal!
After another week of deliberation, they said yes! They were afraid she'd quit and leave them in the ditch. They needed her to manage her large clients until they found capable replacements.
By working 40% fewer hours and getting paid the same, she got a 67% raise for six months. In other words, the value of her severance package increased by over $85,000.
Not only was she getting another six months of full company 401k matching (worth $9,000), she got to accrue 15 more days of paid vacation (worth $7,800), and continued to receive health care insurance.
What's even better is that she LOVED her last six months at the firm! With the stress of dealing with clients gone, every day she went to work felt like a casual get together. The responsibility was on her managers and her trainees. She came home with a big smile every day for six months.
An interesting incident from her final months occurred when management transferred two employees from its New Jersey office. From this one might conclude my wife had been doing the work of two people. Therefore, she felt even less guilt leaving work behind.
When she finally left, she felt like she had won. Not only had she gotten her raise and promotion, she had been able to get a severance and also feel vindicated.
Total value of her severance package: ~$140,000, up from the initial $40,000.
The Next Stage Of The Severance Package
For the next eight months following her retirement, we traveled around Europe and spent time up at our place in Lake Tahoe. We were having a lot of fun when she got an e-mail from her old boss asking if she could return in a part-time capacity.
The two guys who replaced her were making lots of mistakes and one of her employees left. She politely said no, but told him to check back in six months.
Six months later, he checked back with her and this time, my wife was amenable to going back to work as a consultant. She had just enjoyed 14 months of absolute freedom and felt sufficiently rejuvenated to hang out with old colleagues and start making some money again.
But of course she wasn't going to go back to her same role with the same package. It was they who wanted her back, so she asked for a 40% hourly rate raise because they wouldn't have to pay her benefits.
Further, she requested no client interaction due to the stress involved. In other words, her job would be to manage employees to do the work she used to do and leave with no responsibilities.
Related: How Much Do You Need To Make As A Contractor To Replicate Your Day Job Income
Benefits Beyond A Severance
Once again they agreed! For the next 10 months, they paid her 40% more and she felt like she was winning every time she went to the office. Further, no longer was she taking a crowded bus to and from work because ride-sharing prices had become so cheap.
She saved and invested 100% of her consulting income during this time period because she didn't need the money. Our online business had grown by another 100%+ since she first left.
I hope my wife's severance example highlights what is possible if you maintain a good relationship with your employer and talk things out. So long as you create value, good things will happen.
Negotiate A Severance You Deserve
If you want to leave your job anyway, there is no downside in trying to negotiate a severance package. My severance package in 2012 covered all my living expenses through 2017 when my last deferred cash payment was paid. This 5-year runway allowed me to not worry about money and build Financial Samurai into what it is today.
Check out my book: How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye. I first published the book in 2012 and have recently expanded it further to over 250 pages thanks to tremendous reader feedback and successful case studies. It is now in its 6th edition for 2024 and beyond.
In a post-pandemic world, now is the best time to try and negotiate a severance because managers are looking to lay people off. Take advantage today.
This is fantastic article. I wonder if you might offer advice for me. I joined a new investment first 7 month ago in the C-Suite. Thy hired me from another organization where I was also in executive management and where I was on the path to be the next leader of the organization.
Once I arrived at the new firm I discovered the job that they hired me for was not available and also I found a hostile work environment. All of their senior leaders are home grown and I was one of the first C-Suite member to come from out side the organization. We recently had a conversation about the fact that it is not working out for me in the role. Which is disappointing because I was successful in my prior role and also turned down two other job offers to work with them. I am curious if you can offer any advice as to how I should approach the severance conversation and what I should ask for. My next conversation with them is on Tuesday. Any advice you might offer is appreciated.
Hi Andrea, sorry to hear. Keep an open mind and see where you can come up with a win-win scenario. I go deep into severance negotiations with my ebook, which you should read before the conversation.
The key is providing a seemless transition for your employer. Good luck!
Loved reading this post – thank you! My only regret is that I didn’t discuss a severance when quitting my job 6 months ago. I won’t be making that mistake again. Question – do you have any experience or have you heard of anyone discussing a severance successfully at a company outside of the US (e.g. Europe, Asia, Australia)?
I am a above average performer for my company (Bay Area Tech Company) where I have been for little under 2 years. How should I ask about severence given that it is not the norm in my company? I bring a lot of value but I may be easily replaceable. Additionally, the module that I own is quickly becoming stagnant with the customers.
Good thing is I have another job lined up. But I wanted to check how I can milk this cow while I can.
What about for average performing retail employees? Any advice there?
Sincerely,
ARB–Angry Retail Banker
Super super super, Sam!
Another post that shows simply why FS is top drawer!
Thanks much, hope to get inspired by this in the next couple of years!
Here’s my story and I would appreciate any advice. I’ve worked for the same firm for 15 years, rising through the ranks. During this time I’ve had huge personal years (sales). The firm hit tough times about three years ago, around the same time I moved into middle management. I’ve moved three times within the firm in the last three years, every time because I’ve expressed unhappiness to leadership. Every time, they offer a different position in the firm. I asked for severance this past year and was told I did not qualify because my position had not been eliminated (others had been laid off around this time). I feel like as long as I am a decent performer, and there are open, similar roles at the firm, severance will not be on the table. I’d love to leave, but would REALLY love to leave with a severance package. Any ideas?
Sure, here’s a good post: Use FMLA To Negotiate A Severance
And you can check out my book here.
Excellent story; these are the things I learned:
1. Make sure you are adding crazy value and are yet being overlooked and underappreciated.
2. Make sure you have leverage when asking for something.
3. Make sure that if you threaten to leave, the risks for your employer are greater.
4. Make sure the severance allows for transition time because that is what the employer will ultimately need from you in order to extract your value for your replacement(s).
Great summary! Might have to add it to the post. Great to see people read and fully understand the points of the post.
From reading this, it looks like what really matters isn’t performance – it’s how critical you are to your clients/projects, and how easily transferable the company believes those responsibilities to be.
You can be a slacker and a bit of a jerk, but if you’ve got millions of dollars worth of clients (or all the knowledge about a mission critical project), then the company needs you – even if they can’t stand you. On the other hand, if your work can be easily punted to other people then who cares if you’re the top performing, friendliest, most helpful person there.
Your wife wasn’t really negotiating a severance, better to say that she was negotiating a knowledge/client transfer strategy. In the severances that I’ve seen at my company, they give you two weeks then they unceremoniously throw you out the door and pretend you never existed.
Yes, you need to provide more value than you Cost. As an entrepreneur or business owner this is obvious.
You can call the negotiation whatever you want. The goal that we wanted was to make her come out with a win as there is no pension. The better your relationship, the less likely you will be unceremoniously thrown out.
What do you do for a living and did you experience a bad lay off in the past?
My wife just left her job of 6 years to work on expanding her run coaching business and spend more time with our 20 month old daughter. We bought your ebook and attempted to engineer her layoff but didn’t get much of a severance. She is was a damn near idle candidate too. 6 years experience, 14 million in sales per year, got along well with everyone.
She attempted to kind of plant the seed earlier that she was unhappy and wanted to spend more time with our daughter. They did make a variety of offers to keep her as far as working part time or remotely. She expressed that her head really wasn’t in it anymore and we were planning to have another kid and couldn’t imagine working after that. She ask if they could work out a severance package to help transition her out of her current position.
They said that per company policy (Swiss based) they can’t pay severance if someone is leaving voluntarily. The offered to let her work 3 days a week and pay full time if she would stay on for 8 weeks to bring someone else up to speed. My wife took that deal and said she felt confident that if she would have said she was quitting that day they would have said “bye”. She kind of used those weeks as her “severance” and just did the bare minimum and left most of her work undone.
I don’t remember you recommending the technique your wife used in the ebook? That probably would have worked better in my wife’s situation. By spending time kind of creating empathy and planting the seed that she wanted out it gave her company time to work on a mitigation plan.
Either way it was fun trying to get a nice payout and we are thrilled to have her home with our daughter.
Glad your wife got something. And more important, so awesome she gets to spend more time with your daughter!
The moments we’ve had with our son are truly priceless. We will regret nothing spending every day with him since birth. It has truly been a blessing!
Great story Sam. It’s always interesting to hear how employee/employer relationships transpire in today’s world. I feel as though both employee and employers are more pragmatic today, and the idea of how not to burn a bridge really changed.
The professional courtesy of 2 weeks’ notice may still be the standard, but in my opinion it’s generally inadequate time for the employer to find suitable replacement. So in many ways I am willing to wager while most people thought they were doing the right thing when they resign, many actually leave their bosses in an impossible position; meanwhile in a negotiated severance scenario, the “ready to leave” employee is offering the option for the employer to transition at their own pace. Doesn’t necessarily mean the employer will value the extended transition offered, but it’s at least a polite thing to offer in exchange of a negotiated monetary value.
It sounds as though people who doubt employers will consider negotiated severance, lacks the confidence in their own value to their company.
Excellent employees usually get excellent treatment. A lot of people quit because perhaps deep down inside they know they aren’t worth their pay.
But if you are truly a valuable employee, there is no way you are going to leave the company in the lurch and there’s no way you’re going to leave so much potential money behind. It would be completely irrational.
Every single executive level person I have consulted has walked away with something significant. Nobody wants to burn bridges in this day and age.
Two of my co-workers just requested a severance, within 6 months of each other, both were long term employees (20 years and 15 years) and good performers. I could not believe my ears when they told me.
Their advice, be courteous and not demanding, but do be assertive.
The one that has been with the company for 20 years said she worked on this with the manager for a few months, finally indicating that if there is a lay-off, put her on the list. The manager (who also happened to be my manager) thanked her for making it an easier option for him.
The second co-worker (15 years on the job) requested to be released. He indicated that he is too stressed out, and perhaps the company can spend the resources elsewhere. The manager talked with HR, and decided to give him a severance as well.
So.. it can be done.. I was surprised that a company (let alone my company) do this.. but it is being done.
Great to hear. Half the battle is convincing people it can be done. But people either don’t believe it’s possible, or don’t believe in themselves enough to make it happen.
One thing to note is that each company wants you to not disclose the terms of your agreement. Otherwise, they might see other employees try to take the same offer.
One thing to note is that each company wants you to not disclose the terms of your agreement. Otherwise, they might see other employees try to take the same offer.
Every companies hope is that a non-performer quits on their own.
I can’t relate to this high paying finance world you guys live in. I’m a scientist. 34 is the beginning of one’s career, not the end. I’m trying to financially plan so I can retire at 60 but I can’t envision leaving any earlier. I love being around students, post docs, etc. The pay is terrible and there is no longer the tenure security there used to be at most institutions but I love academia.
Definitely. Give it 10 more years of being a scientist if you’re just starting out after a PhD. Your attitude about work might change. But maybe not! Only you can live it and decide.
I’m 15 years out and still love academia. The environment gets harsher with time but for those with tenacity, it is still a worthwhile pursuit. You just can’t expect any monetary reward to come with it.
“When I asked her what about getting to that next level of promotion she said, “I have zero desire to go through the stress my boss goes through every day..”
This reminds me of exactly how I felt about my last job. My boss had a blood clot in his leg and was 30-50 lbs overweight from snarfing down take-out food everyday. Never had time to work out, always stressed. No thanks.
I think I could’ve stayed longer and negotiated a severance package before I quit, but I think pride got in the way. Also FU money :P I think there’s something more psychological that high performers need to get over before they can successfully negotiate a severance pkg. The loss of identity, the loss of feeling valuable…etc.
In your wife’s case, she was such a valuable employee that they were desperate for her to stay 6 months for knowledge transfer. Also it seems like the company was pretty reasonable. There are many many horrible companies and bosses, who would go out of their way to get you fired with cause, or wait you out, or humiliate you. Or the company could be reasonable but the boss a complete asshole. Then it becomes a much bigger fight.
Though in my case, I think my pride got in the way. In the end, I’m happy that I quit because had I stayed and tried to get a severance package I would’ve missed out on SO many awesome after-retirement experiences–wouldn’t give those up for the world. Sometimes you leave money on the table, but gain so much more–if I hadn’t met the right people because I was travelling at the right place at the right time, or met the FI friends I have today at the time that I did, or started the right passion projects at the right time, my retirement wouldn’t be so blissful. I attribute a lot of that to timing. So the timing of our quit date worked out great. It’s not always the case for everyone though and I’m sure many others would benefited from a severance package.
I wonder though regarding the awesome after-retirement experiences.. wouldn’t they just get pushed back a little by the duration it took for you to negotiate a severance? I feel that things generally always work out in the end, no matter the path. You would have still met cool folks and FI friends etc.
This is great! Sam I’ll definitely hire you when I’m ready to retire in 4 years :) Can’t wait :)
Will probably still be retired from consulting 4 years from now. But we shall see!
I really like the theme of the article: knowing your worth and being compensated properly for it.
I, like your wife, tend to feel “pushy” when selling myself to the bosses. It’s tough for some (me), but like you have said, it’s extremely important.
You guys did a great job of negotiating her severance package, and I’m glad she has enjoyed retirement. The part about retirement I’m looking forward to is that you can choose what kind of “work” you wish, whenever you want to do it. Must be nice :)
You are sharing an incredible wisdom that many can learn from. Especially those who get slammed to the curb in middle-age as agism is a shocking reality. Few people handle it this well. I met many others when it happened to me.
Man I wish I had mine to do over again. Not for the money which was decent but just wish I had known I had the upper hand (I knew a little but not the magnitude). So I probably left money on the table, but now I am doing just fine. I wish I had not been so afraid, and felt more confident, know what I know now, etc. But I was not in a position of FI, so it was not a pretty situation.
In my case, I had that feeling that I would be let go for the previous 2 years, as there were eery signs. My performance was exemplary, top ranking department in customer surveys, recent promotion and raise. I will never know what the actual reason was and I have left that a mystery, i.e. looked forward instead of pathetically investigating.
In my case, there is legal precedent and rules of thumb for severance. There was a lot of pieces in play, and they offered me a package just short of minimum. I got legal advice, made a counter offer, and they countered that with a lower offer. The dollar amounts, continued pay cheques, pension credits, medical benefits, lump sums, payment program, etc. were moveable parts. I had just sold my home 2 days before and was planning to buy a house in a rising market and now I had no job and no income. I panicked. I had to move out and had nowhere to go. I asked for the first offer back and took the money and ran. But that was after the first sleepless night. My realtor and mortgage broker and I got into motion, got me a mortgage and a house in an area that skyrocketed and I have never looked back. Those few thousands I lost in severance and the $20,000. a year pension I do not get are irrelevant now.
My house appreciated quickly and fantastically multiplying my down payment. I immediately gained rental income. I took my retirement funds, severance funds, and earnings from freelance work, plus renting a suite and rooms to adult student boarders and saved most of it, learned to invest in the stock market and more than tripled my financial assets. I retired full-time after about 5 years of part-time free-lancing.
Now my total income far exceeds what I would have had working to full retirement, and I travel half the year. I wish I had your good advice at the time and maybe I would have done better in the severance. But I maintained my pride and dignity by ingnot go back to colleagues to try to find out, and came out on top financially. Not only that, my mental and physical health have vastly improved from lower stress and lots of time for exercise and a stimulating life, and no time spent dealing with demoralizing treatment (by management, my customers loved me).
I am not special, but very very lucky. It was mainly dogged persistent, fear, and hard work.
Great to hear it all worked out Dunny! Being politely persistent is key.
Agree with you, polite, persistent, ask, move forward. The soft negotiation. IF you can negotiate a severance package when they don’t want you to leave, you are a genious. Thanks again for this.
I learned a lot as a landlord and freelancer. Now I am learning a new version as I travel. Keeping asking, quiet voice, always act like you love everything and are happy. The other day in Paris I turned a surly rental car agent into a guy who did extras without me asking even though he was extremely busy. I remind myself that something good will happen in the next hour, and somehow I get the great results. Oh yeah, here in France, you must have good manners, bonjour, merci, and avoir are essential.
I wish (not really) I had the severance package to negotiate again. Have to practice on car dealers and real estate agents, although I find car dealers totally surly when you are getting the best of them. I don’t rise to the bait, just smile and wait for them to make their next move.
Great article and thanks for sharing. I like the negotiation tactics you employed.
I once negotiated a very healhy severance. It was all about reeling in my CEO (and HR) and building a strong story over a 6 month period. I was tempted to speed it up on several occassions but kept it slow and steady. I used the “mosaic theory” and gradually built up the story for the CEO, making him believe what he was seeing. In the end there was only upside in a negotiated severance for both parties and my CEO completely believed it. I walked away with seven figures and straight into another job, making 30% more. The negotiation for the new job was very different but equally effective.
Thanks for sharing and what a positive result! Knowing one’s worth sure is a powerful negotiation tool and also what a great position to have no fear or regrets walking away. What a huge win win experience especially to come back to consult on such favorable terms after a nice hiatus. Love these success stories!
This is something I’m actually going through right now with my employer, that is, trying to negotiate a severance package. I’ve only worked for the company for 2.5 years, I’m not a manager, but I play a critical role within the small company, and can’t be quickly replaced. I’m leaving for a couple different reasons, but I also get the feeling that my company doesn’t mind that I’m resigning. The stressful part is I don’t have a new job lined up yet and I’d like to qualify for unemployment insurance, while I search for a new job. Since I feel that it is a mutual decision between me and my employer that I am resigning, do you think it’s necessary to have them write in a clause in the separation agreement that they will agree to have “laid me off” even though technically I initiated the resignation? Or is it enough if I can get them to agree by email that they will support me if I file for unemployment? (The only seemingly beneficial part of the separation agreement currently states that if I continue working for the next 2 months, they’ll pay me my base salary in 3rd month without working).
Never hurts to get things in writing. Every company pays unemployment insurance. Unless you did something very wrong, I highly doubt your company will deny your unemployment claim.
What happens when you ask for the severance, threaten to leave, and they give you nothing and say “there’s the door!” Stay and swallow your pride or simply leave empty handed?
That’s one option if an employee is unskilled enough to create a win-win scenario. Quitting is the easy way out, which is why most people quit instead of negotiate. Another option is to just check in and check out and do no more than what is expected. Eventually, they will let you go. I talk about many options in the book.
What is your background and situation?
Great article FS.
I think your wife was in a fantastic position to be able leverage her value of “10X her salary” to the company. Was she in some kind of sales position?
I could be wrong but I am convinced that most people in “high performance” status do not represent a value of 10x their salary to their company. Think of backoffice/IT/admin positions… I doubt anyone can represent 10x their salary, unless you are in a middle management/senior management position.
She wasn’t in sales.
Another common misconception is that employees are worth much less than they think.
And that is the trick and employer must perform on employees. To make them feel like they are getting a fair wage and accept it.
There are employees who are willing to work for minimum-wage while their CEO makes hundreds of millions of dollars. Think Uber, Mcdonalds’s, etc.
I wish to provide the common employee of the believe that they are worth more and deserve more.
I had the ultimate leverage because I ran the division and was the highest paid person in the company. However they still held my severance when I early retired at the same meager level (12 weeks max) as others got in spite of a career that spanned over 30 years at the same company. I did not negotiate because of three reasons. I was leaving on my own volition and you do not normally get severance when you retire, even if you retire early. Second, every single person that had been terminated before me only got a max of 12 weeks including my former company lawyer that pulled the lawsuit card on them, and failed. And third I hoped to consult with them going forward and could not afford to burn a bridge. What does kill me is that one of my key guys early retired from the same place with a similar long career and they gave him 52 weeks! Apparently they changed their policy in the three years since I left. I do not regret it because the company has used me on some fun consulting continuously for the last three years and so I’ll net out ahead most likely. Plus I did not need the money and my friend needs it badly. Great post as usual, and congrats on your smart wife’s success!
Man, 52 weeks is awesome. Win some, and you lose some I guess.
I ended up getting sort of close to that. But more importantly, I got 100% of my deferred cash and stock compensation that paid out over 5 years. If you quit, you get none of it.
When you say “deferred stock” compensation are you referring to options and/or RSUs that vest over time? Can a company choose to pay those out early for a severance or other circumstance at will? I always thought those are governed by some SEC rules or something. Very curious because I have some “golden handcuffs” right now :)
Same question! And great article and advice.
There is usually some discretion to waive or accelerate vesting, or to create another relationship that allows you to still qualify during the vesting period (like hiring you as a consultant or appointing you an officer of something).
Honestly nothing about a high proformer and severance negotiations surprises me. Walking out the door at the high end of performance gives you all the leverage. Frankly I sit there so the following is more a conceptual question.
Do severance negotiations work for the average employee that blends in? It would stand to reason the less impact you would have walking out the door the less powerful your negotiating position. Do your findings bear that out or is something else a bigger determinant?
I agree. But most employees believe the less impact they have, the more they’ll be able to negotiate a severance.
There is an arc diagram where average people will get average severance, high performing people will get excellent severances, and extremely annoying or toxic people may also get excellent severances.
Related: Absolute Reputational Destruction Is Another Reason Why Negotiating A Severance Is Possible
This is such a great story. The ROI of your book is higher than any angel investment!
If I ever get the itch to go back to full time work I will not work more than a few years at a particular place.
Interesting post. The hardest part of the above is step 4. Would be interested in getting her thoughts on how she handled (the emotional side) of the few weeks demonstrating she was serious about quitting and the waiting after the conversation about them offering more money. After 10 years, that can be very hard.
This severance thing is something I don’t really fully understand. What are the incentives for a company that employs you at will to give you a severance package?
I understand it in Europe, where you can’t fire people. But in US?
What makes them willing to pay extra money they’re not required to do?
Your wife said “I’m leaving the company, I want a severance package”
Can’t they reply “Oh, we’re sorry you’re leaving but we won’t give you a severance package”?
What would they risk in not offering a severance? That you… quit? :D
Sigh, all that writing and putting together a podcast and I still haven’t made it clear.
I’ve gone back and bolded in the article why and added a reiteration in the final paragraph. Thx for the feedback. I gotta write clearer and simpler!
The key to understanding many things is to look at the situation from the other point of view. In this case, let’s look at the employer’s point of view. If my wife quit, they stood to lose millions of dollars in revenue and months of lost productivity as they looked to interview and replace her and then train her replacement.
The only reason why you are employed is because you create more value than you cost. The more value that you bring, the more an employer will be willing to negotiate a severance with you because the more they stand to lose if you quit.
Pls let me know if this is still unclear. You are not alone in that many employees cannot see past this block.
I realize this post is 4 years old, but: the reason some people (including myself) were confused is because “severance” typically refers to money that is paid as a result of the employer firing/laying off the employee. From wikipedia: “A severance package is pay and benefits that employees may be entitled to receive when they leave employment at a company unwillfully.” Often, some amount of severance pay is mandated by the government, to protect the newly unemployed.
In this case, the roles were flipped — your wife wanted to leave, the company wanted her to stay. So she had the ability to negotiate higher pay in return for her staying on for a limited amount of time. But I wouldn’t call that “severance” pay.
No worries. She also got a severance check when she left equal to many months of salary too.
It continues to be hard for people to believe a severance is possible. But that’s the fun of sharing our experiences. GL!
It wasn’t a severance package. It was more like “You want to leave, but please, please, we want you to stay for 6 more months” package. That’s where she got the leverage to be paid a lot of money for agreeing to work a little bit longer.
Exactly. I think this is the moral of the story and it finally makes sense to me now!
She still did get a lump sum severance equal to three months of salary + all vacation days paid + 6 months of free health insurance. That was the base package equal to around $50,000.
The other $90,000+ was the negotiated bonus.