Psychology Today: Here To Help


You have just been fired. You feel that the severance arrangements are outrageously unfair. What should you ask for instead?

Unfortunately, there are few industry standards about what is "fair." With few exceptions, there is no legal obligation to provide a "fair" severance arrangement for employees-at-will. The lack of industry standards regarding "fairness" of severance benefits is supported by a survey of members of the Administrative Management Society. Fully 60% of member firms reported that they have no formal severance policies. Management may thus be just as much in the dark as you regarding what is "fair." Some issues to consider in looking at the severance package include salary continuation, benefits, and retained search services.

Salary Continuation

Approximately 17% of companies surveyed by the Administrative Management Society provide one week of pay for each year worked. Only 1% provide two weeks pay for each year worked.

While length of service is often an important factor, there are other issues that merit considerations. Perhaps the most important one from the employee's perspective is the amount of time required to find comparable employment in today's labor market. Local employment recruiters and retained search consultants can help the you get a sense of market condition.

Of course, the best time to approach search firms and retained search consultants is BEFORE you really need the information. You are best advised to talk with some of the better retained search firms and contingency firms where you have a personal relationship. Some unethical contingency firms might listen to your question. And once you leave the office they may call your boss and say, "If you ever have an opening at your shop we have some great candidates....."


Given a choice, most of us would prefer a lump-sum payment rather than salary continuation. After all, the sooner you are no longer financially dependent on the company that just fired you the better off you are. On the other hand, we counsel salary continuation with a twist.

Salary continuation allows you to continue to answer, "Yes" when asked if you are still employed. Once that corporate connection is formally severed, your marketability may decrease.

Salary continuation often allows for a continuation of disability benefits. Once you accept the lump sum, you may find yourself without this important coverage.

For long service employees, the longer you can continue to contribute to the pension system the better it will be once you retire. Salary continuation allows for continued contributions, whereas lump sum does not.

Many of our client companies are moving to lump sum termination pay-outs because it actually is less expensive when one factors in benefit costs. We usually recommend a hybrid model which combines salary continuation and lump sum payment. Under this model, the executive receives salary continuation and full benefits for a defined period of time. Should the person find paid employment prior to the defined period, then the person will receive a lump sum equal to what is left in the salary continuation program. The value of this hybrid approach is that it provides an incentive for executives to move quickly and find employment. At the same time, it provides them with the benefits of salary continuation during the time that they will need it.


Under the U.S. Comprehensive Omnibus Budget Reconciliation Act of 1986, (popularly known as COBRA), companies with at least 20 employees must make medical coverage available at group insurance rates for as long as 18 months after the employee leaves. If the company health insurance expires before a new job is obtained, the employer must offer additional coverage, although at a more expensive individual rate.

During this 18 month period, the cost to the employee will be 102% of the corporate premium. In most cases, it will be cheaper to continue with the COBRA program. But the company health insurance program may have more coverage than the employee needs or wants. Compare COBRA costs with that of a private health insurance program to be sure. Unemployment Insurance: If given the option of resigning, it is still possible to collect unemployment insurance as long as the employee and the company agree that the employee "resigned under pressure."

retained search

Corporate-sponsored retained search consultants take the role of the employees "campaign manager" in conducting the job search. The search is still under the control of the employee and the employee does most of the work, but the retained search consultant provides a structure, administrative support, and a source of quality control for the job search. Services generally provided include:

- Career Assessment, leading to a thorough review of career direction.
- Negotiation of references with past employers.
- Development of effective employment search techniques.

  • Financial counseling
  • Interview skills training
  • Targeted mail campaigns to prospective companies
  • Salary surveys and salary negotiation tips
  • On-going support services once the job is obtained to insure that the new position works out
  • Secretarial services

Costs are generally 15-18% of the employee's total cash compensation, thus the service is not cheap. In addition different retained search firms have different approaches and philosophies. Other firms do not provide consulting, but offer two day training workshops with more or less individual work as part of the program.

Since it is your career and your life, you might ask for the option to select the retained search firm that best meets your needs. After all, you may not feel all that comfortable with the firm selected by the company that just fired you!


You will probably be asked to sign a waiver of rights. This agreement provides you with extra benefits beyond what is stated in the personnel manual. In return you will be asked to sign a document which waives your right to sue the company. Asking you to sign such a document is fairly typical these days. It does not necessarily signify that the company is afraid that you have a "case" against them. As with all legal documents, it is a good idea to get the advise of your own counsel.

The best counsel is an attorney who specializes in employment law in your state. Many of the issues impacting you are based on judicial interpretation and not statutes. You want to work with someone who is up-to-date on these issues.

Go to your local Bar Association and get some names. The best attorneys will charge you a fee rather than take it on a contingency basis. Taking your case on a contingency basis predisposes the attorney to take a more aggressive stance than you may indeed want to take. In any negotiation, a good attorney can always ask that attorney fees be reimbursed by the company. Many companies would rather do severance negotiations with a competent attorney than with you. Some questions to ask of attorneys are:

"Do you only represent plaintiffs or do you also do defense work?" An attorney who only represents plaintiffs might take a more aggressive stance than someone who understands how companies operate, having worked for companies.

You owe it to yourself to understand your rights before signing. It is what good HR executives would say to employees. And now we are saying it to you!


Laurence J. Stybel and Maryanne Peabody are founders of Stybel, Peabody & Associates, Inc. of Boston. The firm provides senior executive transition services: retained search, coaching, and helping senior executives find new chapters in their professional lives. Larry is President of the Boston Human Resource Association. Maryanne is on the Board of Directors of the National Association of Corporate Directors' New England Chapter.

Their website is and
For more information, call 617-371-2990.