How to Negotiate a severance package and exit package – top 10 Tips

  1. Get copies of your contract paperwork.
  2. Be sure to get ready.
  3. Make a list of the conditions you want in the settlement agreement.
  4. Determine the additional perks you want to negotiate for.
  5. Pick your negotiating tactics wisely.
  6. Create a resignation letter and employment reference that you’re happy with.
  7. When negotiating, try to speak with a person in a position of authority.
  8. Review the settlement agreement you receive carefully and seek legal counsel from an employment attorney
  9. understanding how far to push your employer

1. Obtain copies of your contractual documentation

If necessary, check your files to see if you have copies of the following documents::

  • Employment/service agreement contract
  • Agreement on intellectual property and confidentiality for the EMI share option program
  • Scheme for Restricted Share Units
  • agreement among shareholders
  • any unique commission, bonus, etc. arrangements.

Ask your employer’s human resources department to send you the documents if you don’t already have copies of any of them and they are pertinent to your work status.

These agreements will play a significant role in the talks over your exit compensation with your company and will be crucial in identifying your contractual rights and obligations as an employee or senior executive. For instance, if your employment contract (or any other documents) contains a “non-compete” clause, you might want to consider negotiating a waiver for this clause post the settlement agreement.

2. Prepare yourself properly for the severance package negotiations

You should take the following actions as soon as you can:

  • Obtain copies of the pertinent documents listed above as well as your employer’s settlement offer, whether it be a settlement plan or a settlement agreement, as part of the exit package.
  • If it is appropriate, talk to your partner about how you feel about the ex gratia offer and ask for their advice on what you should do.
  • If you can, speak to previous and present coworkers to find out if your employer has a typical separation package or bargaining approach that they use.
  • Seek official or informal legal advice about your specific circumstances and the best course of action.

3. Make a list of your requirements for the settlement agreement

Choose the financial range and breakdown of the exit package that you are willing to accept. Typically, you want to be compensated the following amounts under an agreement:

  • Your notification payment (whether substituted, while on vacation, or otherwise)
  • Your accumulated but unused vacation time
  • if there is a scenario of redundancy, statutory redundancy pay
  • Additional contractual obligations that you owe money on (like commission, bonus, etc.)
  • Compensation for termination of employment (this can be paid to you up to £30,000 tax-free; any amount over £30,000 will be subject to tax but not the employee’s national insurance; however, your employer will pay national insurance contributions on any amounts over £30,000)

The major ‘battleground’ for an exit package is often how much money you will get paid if you leave your job. This is often between one month’s gross salary and four months’ gross salary, although depending on your circumstances, it may occasionally be lower or higher. My standard recommendation is to put your “best foot forward” with your initial offer (i.e., offer the most you believe you are legitimately entitled to) with the understanding that this amount would inevitably be reduced after negotiations with your employer. However, this does not apply to all situations.

4. Decide what additional benefits you’re seeking to negotiate a severance package

Some clients want to attempt and negotiate additional advantages into their exit package in addition to financial compensation; these can include (but are of course not limited to):

  • Paying for training expenses; making contributions towards outplacement fees;
  • letting you keep your mobile phone, laptop, and/or mobile number from your previous employer;
  • extending the duration of your medical insurance coverage, or
  • allowing you to continue using your business car.

Again, at the start of the negotiations, you should express your desire to receive these perks.

It may also be a good idea to confirm that you will continue to be protected by the directors’ insurance policy of the company from which you are departing if you are a registered director of that company.

5. Choose your negotiating strategy carefully

According to my experience, it is almost always preferable to start a negotiation with a “softly softly” strategy. Being polite, succinct, and clear are your friends when dealing with third parties; going into the negotiation with an aggressive mentality will, unless the circumstances are extremely exceptional, not only potentially alienate the person you are negotiating with but may also harm your credibility. According to my experience, it is usually a good idea to start off with the “softly, softly” approach because you can always get “punchier” at a later point in the discussions if you feel the need to.

6. Draft an employment reference and departure announcement that you’re happy with

A crucial factor in their leaving for many top executives is having agreed “messaging” upon termination, and this is typically true for the company as well. Therefore, it is wise to attempt to design and agree on the language for a joint announcement early in the negotiation process, as well as the language for the reference that your employer will provide to potential employers upon request.

Normally, I would advise you to create a reference and announcement that you are comfortable with early in the negotiation process and send it to your employer as soon as it is feasible and suitable.

7. Try and deal with somebody in a position of authority when you negotiate your severance package

If you know the people who are deciding your settlement agreement (which, if you are an executive, is quite often the case), it is almost always a good idea to see if you can speak to them directly about it. Negotiating an exit package with your employer can frequently be as much political as it is legal.

8. Carefully review the settlement agreement you’re sent

Check that the settlement agreement you’ve received incorporates the heads of terms that have been agreed upon with your employer and that the terms of the settlement agreement as a whole reflect the tone and content of the exit package negotiations to date. This may seem like a simple thing to write, but it is crucial.

9. Take specialist legal advice from an employment solicitor

You might not be shocked to learn that a professional employment lawyer advises the employee to see a specialised employment lawyer regarding the settlement agreement. To start your discussions off well, it is nearly always a good idea to at least receive some preliminary guidance from a qualified employment attorney for the following reasons:

Specialists know what to search for and where to seek it, and they have the breadth and depth of expertise and information you need to receive the best settlement offer from your employer; Your employer will require you to consult with a qualified attorney to obtain legal advice on the terms and implications of the settlement agreement. If you are required to do so, it is advisable to consult with an attorney who specializes in the area in question. Your employer will almost always contribute to your legal fees, so they frequently pay for the cost of receiving specialist advice on your agreement.

10. Know how far to push your employer on the exit package

Knowing when to push back and how hard to press is a crucial bargaining skill. Continued pushing the (negotiation) envelope can frequently be detrimental to the negotiations as it may result in the withdrawal of the settlement agreement offer (this is, in my experience, uncommon but possible), an increase in legal fees, and a potential deterioration of your relationship with your employer. For instance, you might perceive starting ACAS Early Conciliation as an effort to improve your leverage in the discussions, but your employer would interpret it as a hostile gesture. You must compare the advantages and drawbacks of each option.

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