Some of the biggest technology industry players, including Google-parent Alphabet, Amazon, Meta and Microsoft, have announced mass layoffs in recent months.
In most cases, companies aren’t legally required to pay workers or offer benefits once their employment ends. But they’re often motivated to do so to shield themselves from liability and to help defuse any hard feelings by tiding workers over while they search for new opportunities.
“Severance is a very formal version of ‘Don’t go away mad, just go away,'” said Fordham economics professor Giacomo Santangelo.
“Companies are considering how much they have to give you so that you go quietly, because when a person is laid off, this has an adverse effect on them. They try to soften that blow a little,” he told CBS MoneyWatch.
While the amount of severance a laid-off worker gets varies widely depending on the industry, company and the employee’s tenure, exit packages tend to have some standard components.
What’s in a severance package?
The most variable part of a severance agreement is the amount and duration of extra pay and benefits a worker receives.
Severance packages can include a mix of the following:
- Financial compensation
- Extension of health care and other benefits
- A portion of one’s bonus
- Accelerated vesting of stock
- Outplacement assistance or career coaching
“We are seeing commonalities in things people are getting, but not the durations,” Santangelo said. “We’ll see the extension of benefits beyond the termination date, but as far as what those values are it depends on the company. There is no standard.”
If your job loss is part of a mass layoff, the company is required by federal law to provide at least 60 days notice under the Worker Adjustment and Retraining Notification (WARN) Act. Employees are entitled to full pay during the notification period.
But in most other cases, “companies don’t have to pay severance at all. They can give nothing,” New York City-based employment attorney Robert Ottinger told CBS MoneyWatch.
How is severance calculated?
In Ottinger’s view, a week’s worth of pay per year of service is at the low end of what a company should offer, while four weeks for every year of employment is considered generous.
“That’s the formula — it’s the number of weeks you get per year,” he said.
For example, a banking or financial services company can be expected to offer a couple of weeks of severance pay per year of service, according to employment attorney Sahara Pynes.
Don’t count on a bonus
A bonus that’s not part of worker’s base salary can also be very valuable, but isn’t always included in severance packages.
In California, performance-based bonuses are treated like wages — workers are legally entitled to earned bonuses when they are terminated. Other states have fewer protections in place.
“With bonuses, generally speaking, unless you’re almost done with your planned year, I don’t see people always giving a pro-rated portion. You generally lose that in its entirety,” Pynes said.
There’s room to negotiate, however, depending on how the bonus is earned.
“If the bonus is based on objective metrics that have been met, you can argue they it has been earned up to that point, and it may need to be paid off based on the wording of the bonus commission,” Pynes said.
Accelerated vesting
Because tech workers’ compensation can be complex, their severance packages typically are, too. From small tech startups to giants like Google, stock in a company can be more valuable to a worker than salary.
“A lot of tech workers are really working for equity, stock options or equity grants, and these things vest over time,” Ottinger said. “This is 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 case of a layoff, companies won’t automatically accelerate the vesting of stock, in which case it disappears. But some will, including some of the large tech companies cutting their headcounts recently.
What did Google workers get?
When Google announced earlier this month that it would dismiss 12,000 employees, CEO Sundar Pichai told U.S. workers they would be paid during the 60-day notification period required under the WARN act.
The company checked other boxes, too.
Workers get a minimum of 16 weeks’ salary, plus two weeks for every additional year at Google, as well as accelerated stock vesting. The company said it would also pay out workers’ 2022 bonuses and unused vacation days. It also said it is extending workers health care benefits and offering job placement services for six months.
Microsoft, which on January 18 said it would cut 10,000 jobs, said benefits-eligible U.S. employees would be notified 60 days before their termination ends and receive an unspecified amount of “above-market” severance pay, as well as six months of health care benefits, career transition assistance and stock vesting.
Can you negotiate?
In some cases, it can’t hurt to ask for a better exit package if you’re unhappy with the offer, experts say. Keep in mind, though, that larger companies implementing mass layoffs are unlikely to make concessions on an individual basis.
“Generally speaking, for a mass layoff at these huge tech companies, the exceptions are going to be few and far between because otherwise it opens the floodgates,” Pynes said. “Smaller companies are not setting such a huge precedent necessarily, so they might have more flexibility.”
Ottinger agreed that larger companies are not likely to budge.
“If your company decided to lay off 12,000 people, if they make a change for one guy, everyone is going to come clamoring,” he said.
But if it’s just you getting laid off, it is often worth trying to negotiate a better exit package, especially for a long-tenured employee.
“We get lots of people who get substantial enhancements just by asking. Usually they have been there a while, they are valued employees and the company wants to maintain a good relationship going forward,” Pynes said.
Leverage goodwill you’ve earned over the course of your time at the company, he advised.
“It can work just by asking — if you have relationships with people who have the authority to sweeten the pie for you.”
