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Here's how to tell if your company's severance policy is a "good" policy

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Layoffs this year have been mostly confined to the hardest hit sectors of the economy, particularly technology. But depending on your industry, you could find yourself facing redundancy if the economy slows more drastically in 2023, and it’s not always clear what to expect from a future former employer as they leave you .

Recent headlines have shown just how broad layoff policy can be on the part of companies, the slash and burn approach Taken by Elon Musk on Twitter at the pain that some leaders will publicly disclose job cut letters presenting the various benefits granted to departing employees.

Layoffs are a reputational issue for companies at a time when the American public ranks how companies treat their employees as the most important ESG issue, according to an annual survey by Just Capital. Living wages, opportunities for training and career advancement, worker safety, and diversity are all factors in human capital metrics, but that doesn’t mean companies get a free pass on how they are downsizing. “Layoffs can be done fairly,” said Martin Whittaker, founding CEO of Just Capital.

“My general philosophy on letting people go is that you want to treat people well because it’s all about your brand and in today’s market, employer brand is very important,” said former resource manager Paul Wolfe. at Indeed, who now runs his own company. consulting firm. “People who come out always talk about your brand,” he said.

But there’s a big problem: Many workers don’t know how to evaluate a job separation agreement—they can’t tell a fair layoff from an unfair layoff. Here are some recommendations from career experts for an employer-employee interaction that no one wants to have, but it’s best to prepare for it in advance.

Don’t sign anything on first notification

A very important knowledge to start with: you don’t have to sign an offer of termination. In fact, career coach Fiona Bryan’s number one. 1 piece of advice when making a redundancy offer is not to sign any documents on the spot during the first notification.

“It’s a very emotional time and legally your employer must give you notice of how long you have to sign the documents,” said Bryan, professional career coach at Ask A Career Expert and senior managing partner at The Bryan Group. . “Take the offer and read it. Ideally, take it to an employment lawyer and offer them short free consultations.”

“It varies by company, but generally you’ll have 21 days to sign a redundancy offer,” said Toni Frana, career services manager at FlexJobs, a membership-based job site for remote roles. and hybrids.

“You can always negotiate the package,” said Andrew Challenger, senior vice president of outplacement firm Challenger, Gray & Christmas. And he says employees are more likely to succeed in this environment, which unlike a sudden and severe downturn such as the Covid crash, is a situation in which many companies have over-hired in a slowing economy. “It’s not a panic, it’s not a knife falling,” he said. Employees will never have as much leverage in an exit negotiation as when they accept a job offer, but “it’s a better time than during a huge crisis,” he said.

Once you’ve had time to process the emotional, financial, and mental changes that a layoff brings, here’s how to tell if your company’s layoff offer is good or bad, and if it’s time. to negotiate a better one.

How you take severance pay into account

As for severance pay, Bryan advises people to consider whether it will be paid in a lump sum or whether the company will keep them on the payroll when they deposit the money into their accounts.

“If it’s paid in a lump sum, sometimes it’s nice to get your severance money and get a new job,” Bryan said. “But sometimes it’s beneficial for people to stay on the payroll, so they can still put continuous employment on their resume with the company.”

If you’re still getting a check from the company, Bryan said you can still indicate that you’re employed by the company on your resume. This is especially important if someone has only been with the company for a short time when they are laid off, and can list active employment for a while longer.

How much money you should expect

Most companies that offer severance pay base it on length of service with a company. Frana said the general rule is that companies offer one week to three weeks of your salary for each year you work for the company.

If you have worked for the company for a year, you can receive between one and three weeks’ salary. But if you’ve been with the company for 10 years, you could get between 10 and 30 weeks’ salary.

“If you were valuable to the company, you might be able to get extra money or ask for extra money,” Bryan said. “But two years of severance pay is usually the maximum. In my history of doing this, I don’t think I’ve heard of anyone going over 24 months.”

How to deal with layoffs and deal with affected employees

Assess health benefits and severance together

In addition to how much you get paid, how quickly your health benefits expire is another part of a company’s redundancy offer.

“I found [health benefits] go through the month the person is still on payroll,” Bryan said. “So it’s another difference if someone stays on the payroll or if they get paid in a lump sum.

If you’re on the payroll for two months or a year for your severance, very often your health benefit coverage will continue for that time as well, Bryan said. But if you take capital, it is difficult for a company to continue your health coverage.

“It’s just the way insurance companies operate. If a person isn’t an employee, a company can’t pay their insurance premium,” Bryan said. “Whereas if you are still on the payroll and receiving your regular salary, a company may also pay your insurance premium.”

In today’s tight job market, some companies are offering more. In its recent layoffs, fintech company Stripe said it was offering the cash equivalent of six months of existing healthcare or healthcare continuation bonuses.

In the United States, no matter how or if you are offered severance pay, the The Ministry of Labor requires companies to provide a temporary continuation of health benefits that were previously available to people who worked for the company. It’s usually at the expense of the employee, and it’s required under COBRAor the Consolidated Omnibus Budget Reconciliation Act.

Although every company is different, they will offer temporary coverage for about two months, Fran said. But these ongoing health benefits aren’t offered at the same rates that were available to you as an employee, and can be expensive for people who have just been laid off.

Challenger said the “total number” of total weeks of severance is the hardest to negotiate, but peripherals like health care, being kept on the payroll longer, and PTO could have more leeway for employees to demand better terms.

Career assistance to negotiate a deal

While severance and health benefits are essential, there are additional resources companies can offer in your severance package, and some you can negotiate, if not initially offered.

It’s important to help employees know what parts of the package don’t necessarily cost money or set major precedents, because that’s what HR typically tries not to do, Bryan said. .

Outplacement benefits, such as resume review, career coaching, and interview training, are major resources companies can offer in their severance packages.

These are among the resources people need most when they’re laid off to help them bounce back into the job market, said Lisa Rangel, founder and CEO of Chameleon Resumes, a resume writing and writing consultancy. job search.

“If the company doesn’t offer them directly, you can negotiate on your own,” Rangel said. Or if they offer a general general outplacement benefit, you can also negotiate which personalized services will benefit you and see if they will.

Other resources may include connection to the company’s alumni network and even access to internal resources, such as attorneys to meet legal needs. When the online payment company Stripe laid off workers in November, they offered former employees access to an alumni email address, as well as career and immigration support. The latter is extremely important for foreign visa applicants whose residence in the United States is contingent upon obtaining employment.

While these services aren’t typically offered by all companies, Bryan said an employee can and should always ask for what they need, and it helps if the cost isn’t too high. If you’re not offered what you need or think you deserve based on your tenure and performance, she added that just like a job offer, everything is negotiable.

Wolfe said the work of a company goes beyond extended financial benefits. As a human resources manager, he said in a redundancy situation: “My job is to help you as much as possible and to help you get your next contract and companies, if they care about employees, want to help. “

“If you’ve never been laid off before, bargaining might not be something you automatically think about,” Frana said. “You can always try to negotiate, whether or not there is room for negotiation, you don’t know if you don’t try.”

While being fired is never ideal and often unexpected, Bryan said you should always stand up for what you need and deserve.

“Severance can be good, when you know it’s coming and you’ve made plans,” Bryan said. “But re-entering the job market takes resources, and it helps when you’re well-prepared, so another company can pick you up.”

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