How women can negotiate a better severance package as recession-driven layoffs climb
Just as women are finally trickling back into the office after a pandemic-driven exodus, many companies are now announcing layoffs. A recent Insight Global survey found that 87% of employers will likely lay off workers if a recession hits, and at least 143 tech companies have laid off over 24,000 employees so far. With growing signs of a recession, experts warn that women, particularly those of color, may be disproportionately targeted by layoffs.
That’s why negotiating a severance package is especially beneficial for female executives, allowing them to secure the resources needed to find a new job without panic. Unfortunately, it’s a topic that’s under-discussed, and much like with salary negotiations, women are less likely to be successful at negotiating severance deals than men, despite engaging in negotiations at a comparable rate.
“Companies have this strong motivation to cut ties and get you to sign right away and move on. And I think the unfortunate thing is the emotional urge to resolve this quickly and move on bleeds over to individuals as well,” says Ben Cook, CEO of the negotiation consulting firm Riva.
Severance packages are like any other business deal. Companies aren’t legally required to provide severance and usually offer it in exchange for signed nondisclosure or noncompete agreements, or to avoid a lawsuit. “The more your company is pressuring you to sign today, the more you should resist. It’s often a huge red flag. If they’re saying, ‘You’ve got to sign this right away or it might disappear,’ immediately you should be asking yourself, ‘What are they so afraid of?’” Cook says.
Negotiating a severance package makes sense. If candidates are encouraged to negotiate when weighing a job offer, the same should apply to the end of their job’s life cycle.
“We’ve seen in our research that women who lobby for promotions or raises are 54% more likely to get them,” Alexis Krivkovich, a managing partner at McKinsey’s San Francisco office, tells Fortune. “So I take that stat and I apply that to severance. It’s the same type of negotiation. It’s just on your way out instead of on your way up.”
Know the best time to negotiate
Women in most senior roles can negotiate their severance package at any time, including when signing a job offer. But generally speaking, the earlier it’s done, the better.
“The best time to talk about severance is in the final stages of negotiating your job offer because it’s always easier to ask for ‘hypothetical’ money as a sweetener to close the deal,” says Cook. For women without executive titles, negotiating a severance package early on is a rare perk. “Unfortunately, most women and most workers will have to navigate the severance conversation after they’ve already been laid off,” Cook says.
Interestingly, women CEOs at publicly traded U.S. corporations land higher severance agreements than men, to the tune of $6.6 million compared with $4.2 million for men, according to one study. While this may sound laudatory at face value, the study found that women considering CEO roles, particularly at underperforming organizations, negotiated better severance deals because they face higher performance-related scrutiny than men.
And the C-suite as a whole still suffers from a gender severance gap. Another study found male executives at major U.S. companies scored an average of $500,000 more in severance than women. As women advance through the ranks, it becomes even more prudent to conduct severance comparisons with peers.
“If you’re in a network full of other individuals who aren’t asking, you’re less likely to be asking too. I think that holds true whether it’s about your first salary, promotion opportunity, or exit. You need that intelligence to know what you’re worth,” Krivkovich says.
Regardless of one’s ability to negotiate severance ahead of a job exit, it’s essential that women proactively learn what additional resources they can broker beyond compensation. Many companies offer extended health care coverage and transition resources like outplacement services and letters of recommendation. Yet a number of individuals fail to use these benefits, says Krivkovich.
“In this moment of tremendous movement of talent, self-educating on what your benefits and rights are in your organization…that’s critically important for everyone,” she says.
Request more time
Women who aren’t in a position to negotiate their severance agreements in advance shouldn’t feel pressured to immediately accept layoff-related severance offers. Employees can request more time to consider what’s on the table and circle back with their human resources team. Depending on location, employers are generally required to give workers 21 to 45 days to review a severance offer.
“In a severance negotiation, don’t sign anything. Say, ‘I need a day to think about this. Wow, this is such sudden news. I’ll come back to you tomorrow,’” Cook advises.
During this time, contact members in your professional and personal network—consultants, attorneys, mentors, former colleagues—to review the offered package.
Know what to ask for
When reviewing the severance package, check all that’s on the table, not just the cash amount.
“People miss the forest for the trees,” Cook says, noting that it’s easy to become fixated on the “top-line number.” But soon-to-be laid-off employees can request outplacement services, a glowing letter of recommendation, or other resources to aid in finding their next role. They should also consider requesting continued health care coverage, career coaching, and reference commitments.
“Severance is not one-size-fits-all. A reasonable severance package is one that will get you through until you find your next role. That could look like six months of runway, or it could look like a surge of resources that will place you for the next position in a really quick way,” Cook says.
Women should be specific with their asks. If an employee’s annual salary is $100,000 and the employer offers only two weeks of pay, for example, a specific ask would explicitly request six weeks of fully covered income totaling $11,538.48. Websites like Talent.com have salary calculators to help determine an exact asking price.
“The universal truth is the more specific you are in an ask, the more likely you are to get something out of it. If you attach a dollar figure, even if your dollar figure is off the mark, you’re more likely to get something than if you don’t,” says Krivkovich.
It’s also a good idea to get creative with securing additional funds. Cook notes that for tech startups, which are notoriously cash poor and have ramped up layoffs in recent months, it may be more fruitful to seek an accelerated vesting schedule instead.
“Rather than asking for more cash, you could ask for all of your equity to vest; maybe you had a four-year package, you can accelerate that. That’s not costing them anything in terms of their day-to-day operations, but that’s going to be valuable for you,” he says.
Know how to ask
Successfully asking for what you want is key to closing any deal. The same goes for negotiating a severance package.
“There is a lot of bad advice about negotiating out there, specifically for women,” says Cook. He points to the notion that negotiating a job deal is simply a matter of confidence, blaming the widely held belief on the “Girlboss” era, now associated with the shortcomings of early-2010s white feminism. Instead, he says to view negotiating as a skill developed throughout one’s career rather than something inherent.
“Negotiation is not about confidence, it’s about leverage,” he says. “If you just go in and say, ‘I demand this,’ you’re not going to get a good outcome. That maybe would work for a white man. But for most women, for people of color, first-generation immigrants, that often can trigger a lot of backlash.”
While conversations that challenge the negative connotations associated with women who self-advocate in the workplace are emerging, biases are still present.
“We saw that when women push for a promotion or a raise, they’re 30% more likely to receive feedback that they are bossy, aggressive, sharp-elbowed, difficult,” says Krivkovich. “If you’ve been self-promoting the same way your male peers do, you’re more likely to get tagged as challenging. And so you learn that lesson very early, and you say, ‘Okay, well then, this is high-stakes poker, it’s not worth it.’”
A strategic approach is to say you’re following the advice of well-respected confidants, Cook says.
“Say, ‘I spoke with several mentors and advisers of mine, including people in this firm, and they told me this is not a sufficient package and that I need to ask for significantly more.’ And then you can lay out some of those specific benefits,” Cook says.
This approach “negates the entire implicit effect, because you are seen as listening to advice, so therefore you must be a team player, even though the content of that advice is to advocate for yourself.”
You’ll likely be able to walk away with something gained from negotiation efforts because employers want to put the issue to bed and, more often than not, don’t want to deal with potential lawsuits from a laid-off employee who walked away from a severance deal.
“From your employer’s standpoint, every employee they’ve laid off is a potential land mine of legal, reputational, and regulatory risk,” Cook says. “You are giving them insurance, peace of mind, and the knowledge that you won’t trigger any potential land mines. You’re giving them your silence, and you have every right to be paid for that in exchange.”