Severance – what private sector employees should think about in negotiations before taking a new position

the importance of negotiating severance

By Dawn Wattie, Surrey Business Lawyer

There is considerable uncertainty in the job market as the global economy continues to emerge from the events of 2009.

Many organizations continue to face restructuring and or downsizing to cut costs. This often leaves senior employees in companies vulnerable because they are often the highest paid staff and have the most benefits.

For many private sector employees the terms of their employment don’t go beyond what’s stated in their offer letter – and usually do not include detailed termination and severance positions. When an employee receives their termination notice after many years of commitment to a company, that individual often doesn’t know if the accompanying severance amount is appropriate.

In many cases severance amounts are not appropriate, leaving exiting employees the need to retain counsel to get advice. This can be avoided by speaking about severance when candidates are in negotiations for a position. This conversation will do two things:

  1. Ensure that there is no uncertainty if employment is terminated by setting out the pay an employee will be entitled to while they are looking for a new job.
  2. Inform candidates about their potential employer’s philosophy with respect to how they deal with restructuring or downsizing and if they are prepared to be fair and reasonable in terms of providing an employee with severance.

Severance negotiations may offer insight into how an organization treats their employees and may inform decision making when it comes to whether or not a job candidate wants to accept a position with a company.

Image Credit: Kjetil Almås under Creative Commons

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