Severance Package

Compensation and benefits offered to an employee upon involuntary termination.

A severance package is compensation provided to employees who are laid off or terminated without cause. It typically includes a cash payment calculated as some multiple of weekly or monthly pay based on tenure, continued health insurance coverage, and sometimes additional elements like extended equity vesting, outplacement support, or continued equipment use.

Severance is rarely legally required in the United States. Unlike most other developed countries, the US has no statutory severance entitlement for most employees. Exceptions include the WARN Act and any severance entitlement written into an employment contract or company policy.

The practical reason companies offer severance is straightforward: they want a signed legal release. By accepting a severance agreement, you're agreeing to waive your right to bring most employment-related legal claims against the company. Understanding this dynamic helps you negotiate from an informed position.

Severance is negotiable — more than most employees realize, and particularly for senior employees, long-tenured employees, and situations where the circumstances of the termination raise legal questions.

Severance Benchmarks by Seniority

Severance packages are not standardized, but norms exist. For individual contributors, one to two weeks per year of service is common, often capped at 12-26 weeks. For managers and directors, 2-4 weeks per year is more typical. For VPs and senior leaders, severance agreements are often negotiated individually and may include 6-12 months of base salary plus accelerated equity vesting. At the executive (C-suite) level, severance terms are usually defined in the employment contract upfront and can include 12-24+ months of total compensation. In all cases, these are starting points — not floors.

What's Negotiable in a Severance Package

  • The cash amount — most companies start with a baseline; senior and long-tenured employees often have leverage to request more.
  • Health insurance continuation — COBRA premiums can be $500-2,000/month; getting employer-covered continuation for 3-6 months is worth negotiating.
  • Equity acceleration — if you have unvested RSUs or options close to vesting, ask whether the company will accelerate some or all of it.
  • Non-disparagement mutuality — ask that the clause runs both ways.
  • References — get an explicit written agreement on what your manager and HR will say if contacted.
  • COBRA subsidy — direct request for the company to pay COBRA premiums for 3-6 months.

The WARN Act: What It Means for You

The Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more full-time employees to provide 60 calendar days advance notice of plant closings or mass layoffs affecting 50 or more employees. If a company fails to give 60 days notice, affected employees may be entitled to up to 60 days of back pay and benefits. Several states (California, New York, New Jersey, Illinois) have their own mini-WARN acts with broader applicability. If you're laid off as part of a group action, check whether WARN or mini-WARN applies — it may entitle you to more than what's in your initial severance offer.

Before You Sign

  • Under the ADEA, you have 21 days to review a severance agreement — 45 days for group layoffs.
  • After signing, you typically have 7 days to revoke your acceptance.
  • Have an employment attorney review any package where the cash amount exceeds $20K or where the termination circumstances raise legal questions.
  • A broad release waives most claims — understand what you're giving up before you give it up.
  • Don't assume the first offer is the only offer — companies have flexibility they don't volunteer upfront.

Example

A director is laid off after seven years. The initial offer is four weeks — below the market benchmark of one week per year of service. She requests a meeting, references her tenure and the typical standard, and negotiates to seven weeks plus health benefit continuation through quarter-end. She also asks for — and receives — acceleration of a stock vest scheduled for the following month.