You’ve been a loyal company employee for years, with strong performance reviews and a boss who values your work. But you and the rest of your team just received your layoff notice with a termination date. The business is being acquired or restructured and your job will not be replaced. In a few months, you will not have this job. But if you stay until that final day, you will get a severance package and possibly a “stay bonus.”
What Is a Severance Package?
Severance is a combination of pay and benefits, usually based on term of employment. It is typically contingent on the employee staying until the termination date. The exact compensation will factor in variables including unused PTO, bonus payments, and stock options. You will likely be offered two to four months of insurance continuation. Larger companies often offer outplacement services to help skilled employees transition to a similar job or better.
Why Are They Offered?
When you accept the severance package, you will probably have to agree to release the employer of any liability. Restructuring and merging companies report to shareholders, a board, or private owners/equity holders, and need to limit the risk that a terminated employee could file a lawsuit. You may also have to sign off on a clause that limits your ability to work for a competitor within a specified time frame, to keep you from sharing company information. Finally, you may also have to agree not to speak out against the company publicly, including a negative Glassdoor employee review.
Should you stay or should you go?
Right now, you are worried that you won’t be able to find a new job, or the right job, or the right job for the right compensation. If you opt to stay for the severance package, you are looking at a steady diet of increasing stress, right up until the termination date. So imagine starting the stressful process of looking for a new job, after months of counting down the days left in your old job. It’s not likely that you will be learning any new skills during this time either; you will be there to transition or finalize your work.
Another consideration is explaining your decision to potential future employers. If you choose to leave before the termination date, could you be seen as someone who “jumps ship” and doesn’t finish projects? If you choose to stay, could you be viewed as less ambitious and willing to work with no potential for advancement, just for a lump sum of money? From our experience, you can lay both of these fears to rest. There are good employees who take severance packages and good employees who move on quickly after receiving a layoff notice, and reasonable employers understand that either decision comes down to weighing a complex set of individual considerations.
When making this decision, it helps to consider the component parts:
- Value of severance package
- Requirements for receiving severance
- Stock options/vesting schedule (will your vesting percentage increase in this time frame)
- 401K/vesting schedule (will your vesting percentage of employer match increase)
- Enjoyment of the work
- Available opportunities
- Available assistance with job placement
- The length of time you project it would take to find a suitable new job
- Potential increase/decrease in salary with new opportunity
- How close you are to retirement, and whether retirement now is an option
Given the complex set of variables, the decision to stay or go differs from individual to individual. If you find yourself in this situation, our recommendation is to take your time and do your research. You will be given time before you are required to make a decision. If you are over 40, the law requires 21 days. Use that time. Review what has been offered in terms of compensation and benefits, as well as any other payouts. Add up the value of your unpaid PTO and figure out the exact amount of the lump sum payment you can expect to receive. If you are in a high-paying position, you may be able to negotiate some of the terms of your severance.
The longer you were with the company, the larger your lump sum payout will likely be, and the more sensible it will likely be to stay until you receive it. Conversely, if you have only been with the company for two years or less, the severance should be small, which means you will likely be aggressively looking for a replacement job until the termination date.
One of the most important things you can do during the time leading up to your termination date is to learn about the local job market for your profession. The first step you can take is to meet with an Imprimis Group recruiter. We can review your employment history, skills, and achievements, and help to inform you about your job prospects. Combine this information with a consideration of all of the other variables, and you should be equipped to make a decision you can feel confident about.
At the very least, having a glimpse into your future can ease the stress of the coming transition.