5 Common Severance Negotiation Mistakes to Avoid

Don't leave money on the table. Learn the most common severance negotiation mistakes and how to avoid them when facing a layoff.

Table of Contents

When presented with a severance package, many people make costly mistakes that leave money and benefits on the table. Here are the five most common mistakes and how to avoid them.

Mistake #1: Signing Too Quickly

The Problem

You receive a severance agreement and sign it within hours or days without careful review. Companies often:

  • Create artificial urgency
  • Present packages as "standard" and non-negotiable
  • Catch employees in an emotional state

What to Do Instead

Take your time:

  • You typically have 21 days to review (45 days if over 40)
  • Use this time strategically
  • Don't let pressure tactics rush you
  • A few days won't change the company's position

Evaluate thoroughly:

  • Read every clause
  • Research comparable packages
  • Consult a lawyer if significant
  • Calculate what you're actually getting

Mistake #2: Assuming It's Non-Negotiable

The Problem

Most people assume the initial offer is final and never try to negotiate. In reality:

  • Many companies have flexibility
  • Initial offers are often starting points
  • HR may have authority to adjust
  • Different items may be negotiable

What to Do Instead

Approach negotiation strategically:

First, assess your leverage:

  • How much do they want your signature?
  • Do you have potential legal claims?
  • How senior is your position?
  • What knowledge do you have?

Then, identify negotiable items:

  • Severance amount/duration
  • Bonus payout
  • Health insurance continuation
  • Equity treatment
  • Outplacement services
  • Reference language
  • Non-compete terms
  • Start date of severance

How to Ask

Sample language:

"I appreciate the offer. Before I sign, I'd like to discuss a few items that would help me during this transition. Would you be open to discussing [specific request]?"

Mistake #3: Focusing Only on Cash

The Problem

People fixate on the severance payout and ignore other valuable elements that may be easier to negotiate.

What to Do Instead

Consider the full package:

Health insurance:

  • COBRA subsidy or extension
  • Can be worth thousands
  • Often easier to negotiate than cash

Equity:

  • Accelerated vesting
  • Extended exercise windows
  • Can be very valuable

Bonus:

  • Pro-rated bonus
  • Target bonus even if not earned
  • Retention bonus payout

Outplacement:

  • Executive coaching
  • Resume services
  • Career transition support

References:

  • Agreed-upon language
  • Specific commitments
  • Neutral reference policy

Non-compete:

  • Elimination or reduction
  • Geographic limitations
  • Time period reduction

The Problem

Severance agreements are legal documents with long-term implications. Signing without understanding can mean:

  • Waiving valuable claims
  • Agreeing to overly broad restrictions
  • Missing negotiation opportunities
  • Not understanding what you're giving up

What to Do Instead

When to get a lawyer:

  • Packages over $10,000
  • Concerns about wrongful termination
  • Complex equity situations
  • Restrictive covenants
  • Senior positions
  • Any clause you don't understand

Finding affordable help:

  • Many employment lawyers offer free consultations
  • Some offer fixed-fee severance reviews
  • Legal aid may be available
  • Worth the investment for significant packages

What a lawyer can identify:

  • Unenforceable clauses
  • Unusual restrictions
  • Missing protections
  • Negotiation opportunities

Mistake #5: Burning Bridges

The Problem

Anger and frustration lead to actions that damage future opportunities:

  • Aggressive or hostile negotiation
  • Badmouthing the company
  • Dramatic departures
  • Social media venting

What to Do Instead

Stay professional:

  • Negotiate firmly but respectfully
  • Keep emotions out of communications
  • Maintain relationships with colleagues
  • Think long-term about your reputation

Why it matters:

  • You may need references
  • Industries are smaller than you think
  • The negotiator may hire you later
  • Your reputation follows you

Appropriate advocacy:

  • Make clear, reasonable requests
  • Explain your reasoning
  • Be willing to compromise
  • Know your walk-away point
  • Stay calm throughout

Bonus: Know What You're Giving Up

Common Severance Requirements

You're typically agreeing to:

  • Release all legal claims
  • Keep terms confidential
  • Not disparage the company
  • Return all company property
  • Cooperate with future matters

Understand the Trade

Make sure the package is worth what you're giving up:

  • If you have legal claims, get advice
  • Confidentiality goes both ways
  • Non-disparagement is usually mutual
  • Cooperation should be reasonable

Action Steps

Before Signing

  1. Read everything — multiple times
  2. Calculate the value — of every component
  3. Research — what's typical for your industry/level
  4. List questions — anything unclear
  5. Identify requests — what would you like changed
  6. Consider legal review — especially for larger packages
  7. Prepare your ask — professional, specific, reasonable
  8. Negotiate — you have nothing to lose
  9. Take your time — use the full review period

What You Deserve

Remember: severance is compensation for your service and for waiving your rights. You deserve:

  • Fair compensation
  • Clear terms
  • Reasonable restrictions
  • Time to review
  • Professional treatment

Related Resources:

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