Here’s how to know if your company’s layoff policy is a ‘good’ one

Layoffs this year have been mostly limited to the hardest-hit sectors of the economy, especially tech. But depending on your industry, you might find yourself face-to-face with a layoff if the economy slows more drastically in 2023, and it’s not always clear what you should expect from a soon-to-be-former employer as they let you go.

Recent headlines have show how wide in range layoffs policy can be from corporations, from the slash-and-burn approach taken by Elon Musk at Twitter to the pains some leaders are going to in publicly disclosed letters about job cuts laying out the various benefits being extended to departing employees.

Layoffs are a reputational issue for companies at a time when the American public ranks how businesses treat their workers as the most important ESG issue, according to annual polling conducted by Just Capital. Living wages, training and career advancement opportunities, worker safety, and diversity all factor into human capital metrics, but that doesn’t mean companies get a free pass on how they reduce headcount. “Layoffs can be done in a just way,” said Martin Whittaker, founding CEO of Just Capital.

“My general philosophy on letting people go is you want to treat people well because it all goes back to your brand and in today’s market employer brand is very important,” said Paul Wolfe, former head of HR at Indeed who now runs his own corporate consulting firm. “People exiting are still out there talking about your brand,” he said.

But there’s a big problem: many workers don’t know how to evaluate a job separation agreement, in effect, they can’t tell a just layoff from an unjust one. Here are some recommendations from career experts for an employer-employee interaction no one wants to have, but it’s better to prepare for in advance.

Don’t sign anything when first notified

A very important piece of knowledge to start with: you don’t have to sign a job separation offer. In fact, career coach Fiona Bryan’s No. 1 piece of advice when given a layoff offer is to not sign any document on the spot when you’re first notified.

“It’s a really emotional time, and, legally, your employer has to give you a notice on how long you have to sign the paperwork,” said Bryan, a professional career coach at Ask A Career Expert and senior managing partner at The Bryan Group. “Take the offer away and read it. Ideally, take it to an employment lawyer, and some offer short, free consultations.”

“It varies on the company, but typically, you’ll have 21 days to sign a layoff offer,” said Toni Frana, a career services manager at FlexJobs, a membership-based job site for remote and hybrid roles.

“You can always negotiate on the package,” said Andrew Challenger, senior vice president at outplacement firm Challenger, Gray & Christmas. And he says employees are more likely to be successful in this environment, which unlike a sudden, severe downturn such as the Covid crash, is a situation in which many companies over-hired into a slowing economy. “This is not a panic, this is not a knife is falling,” he said. Employees are never going to have as much leverage in a negotiation on the way out as when they accept a job offer, but “now is a better time than during a huge crisis,” he said.

After you’ve had time to process the emotional, financial, and mental changes that a layoff brings, here’s how to know whether your company’s layoff offer is a good one or not, and if it’s time to negotiate for a better one.

How you take severance pay matters

When it comes to severance pay, Bryan advises that people identify whether it will be paid in a lump sum or if the company will keep them on the payroll as they deposit the money into their accounts.

“If it’s paid out in a lump sum, sometimes it’s nice to get your layoff money and find a new job,” Bryan said. “But sometimes it benefits people to stay on the payroll, so they can continue to list continued employment on their resume with the company.”

If you’re still getting a check from the company, Bryan said you can still say you’re employed at the company on your resume. This is especially important if someone has only worked a short time at the company when they’re let go, and they can list active employment for a while longer.

How much money you should expect

Most companies that offer severance pay base it on tenure at a company. Frana said the general rule of thumb is that companies offer one week to three weeks of your pay for each year you worked at the company.

If you’ve worked at the company for one year, then you could get anywhere from one to three weeks of pay. But if you’ve been at the company for 10 years, you could get anywhere from 10 weeks to 30 weeks of pay.

“If you were valuable to the company, you might be able to get additional money, or ask for additional money,” Bryan said. “But two years of severance pay is usually the maximum. In my history of doing this, I don’t think I’ve heard anybody go past 24 months.”

Evaluate health benefits and severance together

On top of how much you get paid, how quickly your health benefits expire is another part of a company’s layoff offer.

“I’ve found [health benefits] go through the month that the person is still on the payroll,” Bryan said. “So that’s another difference if someone stays on the payroll, or if they’re paid in a lump sum.”

If you’re on the payroll for two months, or a year, for your severance payments, quite often your health benefits coverage will continue for that time as well, Bryan said. But if you take a lump sum, it’s difficult for a company to continue your healthcare coverage.

“It’s just the way insurance companies work. If a person isn’t an employee, a company can’t pay their insurance premium,” Bryan said. “Whereas if you’re still on the payroll and you’re being paid your regular salary, then a company can pay out your insurance premium as well.”

In the current tight labor market, some companies are offering more. In its recent layoffs, fintech company Stripe said it was offering the cash equivalent of six months of existing health-care premiums or health care continuation.

In the U.S., no matter how or if you’re offered severance pay, the Department of Labor requires companies to offer a temporary continuation of the health benefits that people were previously offered while working at the company. This is usually at the cost of the employee, and it’s required under COBRA, or the Consolidated Omnibus Budget Reconciliation Act.

While every company is different, they’ll offer temporary coverage for roughly two months, Frana said. But these continued health benefits are not offered at the same rates you were offered as an employee and can get pricey for people who were just laid off.

Challenger said the “headline number” of total weeks of severance pay is the hardest to negotiate, but peripherals like health care, being kept on the payroll for longer, and PTO may have more room for employees to ask for better terms.

While severance pay and health benefits are critical, there are additional resources that companies might offer in your layoff package, and some you can negotiate for, if not initially offered.

Helping employees know about the pieces of the package that don’t necessarily cost money or don’t set major precedents is important because that’s what HR is usually looking to not do, Bryan said.

Outplacement benefits, such as resume reviews, career coaching, and interview training, are major resources that companies might offer in their severance packages.

These are among the resources that people need the most when they’re laid off to help them bounce back into the job market, said Lisa Rangel, the founder and CEO of Chameleon Resumes, a resume writing and job landing consulting company.

“If the company isn’t offering them directly, you can negotiate for them yourself,” Rangel said. “Or if they’re offering a blanket, general outplacement benefit, you can also negotiate for what custom services will benefit you and see if they’ll do that.”

Other resources can include connection to the company’s alumni network and even access to internal resources, like lawyers to assist with legal needs. When online payments company Stripe laid off workers in November, they offered former employees access to an alumni email address, as well as career support and immigration support. The latter is extremely important to foreign visa workers whose residence in the U.S. is contingent on having a job.