You have been fired from your job.  How much severance pay can you expect?

You have been fired from your job. How much severance pay can you expect?

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  • January 26, 2023
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Some of the biggest players in the tech industry, including Google parent Alphabet, Amazon, Meta and Microsoft, have announced mass layoffs in recent months.

In most cases, companies are not legally required to pay workers or provide benefits once their employment ends. But they are often motivated to protect themselves from liability claims and to help defuse negative feelings by making ends meet as workers seek new opportunities.

“The severance package is a very formal version of ‘don’t worry, just walk away,'” said Fordham economics professor Giacomo Santangelo.

“Companies think about how much they have to give you so that you leave calmly, because if a person is made redundant, it has a negative impact on them. They’re trying to soften that blow a little bit,” he told CBS MoneyWatch.

While the amount of severance pay a laid-off worker receives varies widely by industry, company, and the worker’s tenure, exit packages typically have some standard components.

What’s in a severance package?

The most variable part of a severance agreement is the amount and duration of the bonuses and benefits an employee receives.

Severance packages may include a mix of the following:

Financial CompensationHealthcare Extension and Other BenefitsPart of BonusExpedited Stock AllocationOutplacement Assistance or Career Coaching

“We see similarities in the things that people get, but not in the duration,” Santangelo said. “We will see the extension of benefits beyond the termination date, but what those values ​​are depends on the company. There is no standard.”

If your job loss is part of a mass layoff, federal law requires the company to provide at least 60 days’ notice under the Worker Adjustment and Retraining Notification (WARN) Act. Employees are entitled to full pay during the reporting period.

But in most other cases, “companies don’t have to pay severance at all. You can’t give anything,” New York City-based employment attorney Robert Ottinger told CBS MoneyWatch.

US setting remains stable, latest jobs report shows 04:50

How is the severance payment calculated?

In Ottinger’s view, one week’s pay per year of service is on the low end of what a company should offer, while four weeks per year of service is considered generous.

“That’s the formula — it’s the number of weeks you get per year,” he said.

For example, a bank or financial services company might be expected to offer a few weeks of severance pay for every year of service, according to employment attorney Sahara Pynes.

Don’t rely on a bonus

A bonus that is not part of the employee’s base salary can also be very valuable, but it is not always included in severance packages.

In California, performance-related awards are treated like wages—workers are legally entitled to earned awards if they are terminated. Other states have fewer protective measures.

“With bonuses, I generally don’t see people always giving a prorated share unless you’re almost done with your projected year. They generally lose that completely,” Pynes said.

However, there is room for negotiation depending on how the bonus is earned.

“If the bonus is based on objective metrics that have been met, you can argue that it has been earned up to that point and it may need to be paid out based on the wording of the bonus commission,” Pynes said.

Accelerated vesting

Because tech employee compensation can be complex, so are their severance packages. From small tech startups to giants like Google, stocks in a company can be more valuable to an employee than salary.

“A lot of techs really work for stock, stock options or stock grants, and those things vest over time,” Ottinger said. “That’s how most people who work for tech companies really make money. Whether you work for Google or a smaller tech company, you want a piece of the pie.”

In the event of dismissal, companies will not automatically accelerate the transfer of shares, in which case they will disappear. But some will, including some of the big tech companies that have recently reduced their headcount.

What did Google employees get?

When Google announced earlier this month it would lay off 12,000 employees, CEO Sundar Pichai told US workers they would be paid during the 60-day notice period required by the WARN Act.

The company ticked other boxes, too.

Employees will receive a minimum of 16 weeks’ salary, plus two weeks for each additional year at Google, as well as an accelerated transfer of shares. The company said it will also pay out workers’ bonuses for 2022 and unused vacation days. It also said it is extending health coverage for workers and offering job placement services for six months.

Microsoft, which announced Jan. 18 that it would cut 10,000 jobs, said eligible US employees would be notified 60 days before the end of their termination and would receive an unspecified amount of “above market” severance pay and six months of health care would benefit benefits, career entry support and stock vesting.

Can you negotiate?

In some cases, there’s no harm in asking for a better exit package if you’re not happy with the offer, experts say. However, keep in mind that larger companies that are conducting mass layoffs are unlikely to make concessions on an individual basis.

“In general, there will be few exceptions to mass layoffs at these giant tech companies, otherwise that will open the floodgates,” Pynes said. “Smaller companies don’t necessarily set as much precedent, so they may have more flexibility.”

Ottinger agreed that larger companies are unlikely to budge.

“If your company decides to lay off 12,000 employees, if they make a change for one man, everyone will scream,” he said.

But when it’s just you getting fired, it’s often worth negotiating a better exit package, especially for a long-time employee.

“We get a lot of people who get significant upgrades just because they ask for it. They’ve usually been there for a while, they’re valued employees, and the company wants to continue to have a good relationship going forward,” Pynes said.

He advised, use the good will you have developed over the course of your time at the company.

“It can work just by asking — if you have relationships with people who have the authority to sweeten the cake for you.”

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