How to Negotiate a Better Severance Package: The Complete Guide (2025)

The Reality of Severance in 2025

Getting laid off is one of the most stressful experiences in any professional's career. In that moment of shock, most people accept whatever severance package is offered without realizing that nearly everything is negotiable.

Here's the uncomfortable truth: only 42% of global employers offered severance to all laid-off employees in 2023, down sharply from 64% in 2021 ¹. In the United States, just 25% of firms offer severance to all employees, making American employers the least likely to provide these benefits globally.

But here's what companies won't tell you: severance packages are rarely final offers. The initial package is a starting point, and with the right strategy, you can often negotiate significantly better terms.

Why Companies Negotiate (And Why You Should Too)

Employers have strong incentives to negotiate severance rather than face potential conflict:

• Legal risk mitigation: The average cost to defend an employment lawsuit exceeds $75,000 ²
• Reputation protection: Public disputes damage employer branding
• Clean separation: Companies prefer smooth transitions over prolonged conflict
• Confidentiality: Many are willing to pay more for comprehensive release agreements

As employment attorney Matt Ruggles emphasizes: "Employers negotiate from a legal-risk perspective, not a gratitude-based mindset" ³. Understanding this dynamic is key to successful negotiation.

What's Actually Negotiable (Beyond Base Pay)

Most people focus exclusively on the cash component of severance. That's a mistake. Here are the eight key elements you should negotiate:

1. Extended Severance Pay

The standard formula is one to two weeks of pay per year of service, but this varies significantly:

• Entry-level employees: One week per year
• Mid-level employees: Two to three weeks per year
• Senior employees: One month per year
• Executives: Often much higher multiples

The average severance package at US-listed companies was approximately $40,000 per employee, though at companies like Theseus Pharmaceuticals, it averaged nearly $212,000 ⁴.

2. Health Insurance Continuation (COBRA)

COBRA coverage in 2025 costs between $400-$700 per month for individuals and $1,200-$2,000 for families ⁵. This is one of the most valuable benefits to negotiate:

• Request 3-6 months of employer-paid COBRA premiums
• If full coverage isn't possible, ask for partial subsidies or a lump-sum equivalent
• Request that subsidized COBRA be structured as employer-paid rather than taxable income

Script to use: "I understand COBRA continuation is available for 18 months. Given the abrupt nature of this transition, I'd like to request that the company cover COBRA premiums for the first three to six months as part of the severance package."

3. Non-Compete Clause Modification or Removal

Approximately 26% of workers are subject to non-compete clauses ⁶. These can severely limit your job search options. Negotiate to:

• Reduce the duration (from 12 months to 3-6 months)
• Narrow the geographic scope
• Limit the definition of "competing" businesses
• Seek compensation in exchange for accepting restrictions

Script to use: "I've reviewed the non-compete clause. Given my career planning and market conditions, I'd like to discuss modifying the scope and reducing the duration. I'm open to discussing what would work for both of us."

4. Equity Acceleration

If you have unvested stock options or RSUs, negotiate for:

• Full or partial acceleration of unvested equity
• Extended exercise periods beyond the standard 90 days (ideally one year or more)
• Continued vesting during a consulting period

Script to use: "My compensation includes significant unvested equity. I'd like to negotiate full acceleration of my unvested RSUs and stock options upon this termination without cause."

5. Outplacement Services

Professional career transition support can be worth thousands of dollars. Request:

• One-on-one career coaching (not group sessions)
• Job search strategies and resume support
• Networking guidance for a minimum of three months
• If the employer resists, ask for a stipend to choose your own career coach

Script to use: "Outplacement services would not only help me transition quickly, but also mitigate the company's legal risk and protect team morale."

6. Bonus Retention and Acceleration

If terminated near a bonus period:

• Negotiate pro-rated bonus based on months worked
• Secure full payment of any previously announced bonuses
• Request acceleration of unvested deferred compensation

7. Reference Agreement

Secure your professional reputation:

• Draft a mutually acceptable reference statement
• Request neutral or positive references (not just employment dates)
• Negotiate a specific script for explaining your departure

Script to use: "As part of this severance, I'd like to agree on specific language regarding my employment and departure. Could we draft a joint reference statement confirming my dates of service, role, and the fact that I parted company under a severance agreement?"

8. Mutual Non-Disparagement

Insist on mutual clauses, not one-sided restrictions:

• Both parties commit to professional communication
• Carve out legal disclosures and testimony under oath
• Ensure you can cooperate with government investigations if required

The Step-by-Step Negotiation Process

Step 1: Don't Sign Anything Immediately

This is the most critical step. When presented with a severance offer:

• Request the offer in writing
• Take at least 5 business days to review (21 days if you're 40 or older under federal law)
• Never negotiate in the termination meeting itself

What to say: "I appreciate the offer and need time to review it thoroughly. When do you need my decision by?"

Step 2: Consult an Employment Attorney

Before making any demands:

• Have an attorney review the agreement for potential legal leverage
• Identify any claims you may have (discrimination, retaliation, breach of contract)
• Understand your contractual entitlements

Employment lawyers typically charge $200-$1,500 per hour or 25-40% contingency fees. Many severance negotiation attorneys pay for themselves through improved terms ⁷.

Step 3: Document Your Value

Before negotiations begin, compile:

• Performance reviews and achievement documentation
• Evidence of special knowledge or client relationships
• Emails confirming your contributions and impact

This creates leverage for demonstrating why your compensation should reflect your value.

Step 4: Make Your Counter-Proposal

Frame requests around business rationales, not personal circumstances:

Step 5: Navigate the Back-and-Forth

Typical severance negotiations take 2-6 weeks. During this time:

• Maintain consistent focus on key priorities
• Show flexibility on secondary items
• Keep all communication in writing
• Consider using your attorney as the primary communicator

Common Mistakes That Destroy Your Leverage

1. Making Demands Before Consulting Legal Counsel

Employers are trained to reject rushed, emotional, or uninformed demands with a "take it or leave it" response. Once you appear unrepresented and unsure of your rights, employers feel safe refusing to negotiate.

2. Asking for Unrealistic Amounts

Numbers without legal basis signal weak leverage. Connect every request to law, documented contributions, or legitimate claims.

3. Signing Under Pressure

Many employees unknowingly waive critical rights related to discrimination, wrongful termination, or unpaid wages. The pressure to sign quickly is common but legally invalid as grounds for enforcement.

4. Focusing Only on Cash

Overlooking equity acceleration, restrictive covenant modifications, and reputation protections can cost you tens of thousands in real value.

5. Accepting One-Sided Terms

Never agree to:

• Non-disparagement clauses that only restrict you
• Confidentiality provisions preventing you from discussing workplace issues
• "Clawback" provisions requiring repayment if you find work quickly
• Unlimited post-employment cooperation without compensation

Red Flags in Severance Agreements

Watch for these problematic clauses:

1. Overly broad releases covering discrimination or harassment claims without adequate review time
2. Unreasonable non-competes restricting you from your entire industry for 12+ months
3. Clawback provisions requiring repayment if you find new work quickly
4. One-sided non-disparagement that muzzles you while leaving the employer free to damage your reputation
5. Unlimited cooperation requirements without compensation or time limits
6. Vague legal language that seems unclear or contradictory

Timing Considerations

Best Time to Negotiate: Before You're Hired

The optimal time to negotiate severance is during the hiring process, before any hard feelings develop. You can build severance terms into your overall compensation package alongside salary and benefits.

At Termination: Key Timing Factors

• Bonus cycles: If terminated near bonus determination, emphasize your contribution to the year's performance
• Mergers and acquisitions: Companies may be more willing to negotiate for clean exits
• Your review timeline: Use the full period available (21 days if 40+, plus 7-day revocation period)

For executives, job searches typically take 6-12 months at VP+ levels, making extended severance periods especially critical.

Using AI Tools Strategically in Your Transition

While negotiating your exit, you should also be preparing for your next role. AI-powered career tools can help you:

• Document achievements for negotiation leverage and future applications
• Update your resume to reflect your most recent accomplishments
• Prepare for interviews by practicing responses to questions about your departure
• Draft professional communications including negotiation emails and LinkedIn updates

HiredKit offers AI-powered tools that can help you prepare compelling career materials during your transition, ensuring you're ready to hit the ground running once your severance negotiation concludes.

Final Thoughts: Your Leverage Is Greater Than You Think

Remember: severance agreements are "legally binding agreements between you and your employer" where nearly everything is negotiable ⁸. The company's opening position is rarely their final word.

With proper strategy and professional representation, you can significantly improve initial offers while protecting your long-term interests and reputation. The investment in legal counsel and careful negotiation typically pays for itself many times over.

Don't let the shock of job loss prevent you from advocating for what you deserve. Take the time to understand your rights, document your value, and negotiate strategically. Your financial future may depend on it.