Severance Package 101: What It Is and How to Negotiate

Luck Buffer · March 2026 · 9 min read

You were just handed a severance agreement and told to sign it. You're in shock, the HR rep is waiting, and you're trying to read a five-page legal document while processing being fired. This is exactly the moment they're counting on.

Don't sign it today. Not because severance is a trap — it usually isn't — but because you have legal rights to review time, and you almost certainly haven't read the document carefully enough to know what you're giving up. This guide explains what severance is, what's negotiable, and what to watch out for before you sign anything.

What Severance Actually Is

Severance pay is money your employer offers in exchange for your agreement to waive certain legal claims against them — most commonly, the right to sue for wrongful termination. It is not legally required in the US for most private employers. When you receive a severance offer, you are being offered a deal: money and benefits in exchange for a legal release.

This is worth understanding clearly. Severance is not a gift. It is a business transaction. That framing matters when you get to negotiation.

The Standard Formula

Most corporate severance packages follow a formula of 1 to 2 weeks of pay per year of service, with a floor and a ceiling. Common examples:

• 2 years of service at 1 week/year = 2 weeks of pay
• 5 years of service at 2 weeks/year = 10 weeks of pay
• 10 years of service at 2 weeks/year = 20 weeks of pay (often capped at 26 weeks)

Senior roles often get more favorable formulas — 2–4 weeks per year is not uncommon at director level and above. The formula is usually written into a company severance policy, but it is not always disclosed to you upfront. You can ask HR what the formula is.

Severance is paid as either a lump sum or salary continuation over the covered period. Lump sum is generally better for you — it's cleaner, you get the money sooner, and it's not contingent on you complying with ongoing requirements. Salary continuation often means you lose it if you find new employment (some agreements claw back the remaining weeks when you start a new job). Ask which structure you're being offered. Use the Severance Optimizer to compare your after-tax take-home for both options side by side.

What You Typically Get

Beyond the base pay formula, a standard severance package may include:

• Health insurance continuation. Some employers pay COBRA premiums for 1–3 months as part of the package. This is valuable — COBRA is typically $500–$800/month per person and can be a major post-layoff expense.
• Outplacement services. Career coaching, resume help, job placement assistance. Useful for some people, not for others. Don't trade valuable cash severance for outplacement you won't use.
• Vested equity. Options that are already vested remain yours. You typically have 90 days post-termination to exercise them (check your grant agreement — this varies). Unvested equity is forfeited unless you negotiate.
• Accrued PTO payout. Most states require employers to pay out unused vacation time on termination. This is separate from severance — you're owed it regardless of whether you sign the agreement.
• WARN Act pay. If you weren't given 60 days notice before a mass layoff, you may be owed up to 60 days of back pay under the WARN Act. This is legally required, not a gift.

What You Can Actually Negotiate

Most people don't negotiate severance because they assume it's non-negotiable. It often is not. Here's what is actually on the table:

Additional weeks of pay

This is the most common negotiation. If you've been there 4 years and the formula gives you 4 weeks, asking for 8 weeks is reasonable — especially if you have a strong performance record, specialized knowledge, or if they're asking you to do a knowledge transfer. The ask is: "The standard formula is X weeks, but given [tenure / role / transition work], I'd like to discuss X+4 weeks." Have a specific number. Vague asks get vague answers.

COBRA extension

If the package includes 1 month of COBRA coverage, ask for 3. Health insurance at COBRA rates is expensive, and extending coverage costs the employer significantly less than the face value because they're not providing new coverage — they're just covering the premium difference. This is often easier to get than additional cash.

Equity vesting acceleration

If you're within 3–6 months of a vesting date for options or RSUs, specifically ask for that tranche to be accelerated. "I have 2,000 RSUs vesting in April. I'd like to include accelerated vesting for that tranche as part of the agreement." This is a specific, concrete ask that's easier to grant than open-ended acceleration.

Reference and non-disparagement scope

The agreement will almost certainly include a non-disparagement clause — you agree not to say negative things about the company. Ask for it to be mutual. Ask what the reference policy is and get it in writing: who will speak to reference checks, what they will say, and whether they confirm only title and dates or will give a substantive reference.

Job search support

Some employers will keep you on payroll (not salary continuation — actual active employment status) for 30–60 days after your last day, which allows you to continue using the employer's health plan and looks better on your resume. This is more common in tech and at senior levels. It's worth asking about even if it feels unlikely.

What to Watch Out For in the Agreement

The release of claims is the core of the document. Read it carefully. Key things to flag:

Overly broad non-compete clauses. Some severance agreements include non-compete provisions that restrict your ability to work in your field. These are often unenforceable (especially in California, Minnesota, North Dakota, and Oklahoma, which ban most non-competes entirely), but they can be used to threaten or delay you. If you see a non-compete, have a lawyer review it before signing.

Non-solicitation of former colleagues. Most agreements prohibit you from poaching colleagues for 12–24 months. This is usually enforceable and affects your ability to build a team at your next job. You can try to shorten the window or narrow the scope.

Confidentiality scope. You likely already have confidentiality obligations from your employment agreement. Severance agreements sometimes expand or clarify these. Read for anything that seems to prevent you from describing your own work experience to future employers.

Cooperation clauses. Some agreements require you to cooperate with legal proceedings after your departure. This is reasonable in scope, but "cooperation" should be limited to things reasonably related to your employment — not an open-ended obligation to spend unpaid time assisting the company.

The Review Window

Under the Older Workers Benefit Protection Act (OWBPA), if the agreement includes a release of age discrimination claims (which most do, because they're comprehensive releases), you have 21 days to consider it. If the layoff affects a group (generally, 2 or more people in the same reduction), that window extends to 45 days. You also have 7 days to revoke after signing.

This is federal law. They cannot take the offer away because you used your review time. If someone tells you the offer expires in 24 hours, they are either wrong about the law or lying. You have 21 days. Use them.

Get a lawyer to review the agreement if: the release is broad, there's a non-compete, you have equity worth significant money, or you believe the termination may have involved discrimination. One hour of employment attorney time ($300–$500) is often worth it for a $50,000 severance agreement. Many employment attorneys offer free initial consultations.

Adding Severance to Your Runway Calculation

Severance pay extends your runway directly — it's additional liquid funds on top of whatever savings you have. If you receive 8 weeks of pay at $6,000/month gross (roughly $4,700 net), that's ~$9,400 added to your effective savings. Add your severance to the runway calculator alongside your existing savings to see your full picture.

Keep in mind that salary continuation severance stops if you find new employment in some agreements. Model your runway conservatively based on actually receiving all weeks of severance — but if you find a job quickly, the remaining weeks may not materialize. Lump sum removes this uncertainty.

Use the Savings Calculators hub to model different scenarios based on when you expect severance payments to arrive relative to your monthly expenses.

Frequently Asked Questions