# Severance Package: It's a Settlement, Not a Gift (Don't Sign Day One) - Canonical: https://praxy.me/blog/severance-is-negotiable - Author: Ashwin Prasad, Co-founder, Praxy - Published: 2026-09-21 - Updated: 2026-10-01 > **In short:** 58% of people who got a severance package never negotiated it. What a typical severance package includes, what's negotiable, and the email that asks for more. A severance package is not the company being generous. It's the company buying something from you, and what it's buying is your signature on a release of legal claims. That makes the first offer an opening position, not a final one, and the few days before you sign are the only time you can move it. Here is what a typical package contains in the U.S., where each piece comes from, and how movable it usually is. (India works differently; there's a section on it below.) | Piece of the package | Where it comes from | How movable it usually is | | --------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | | Weeks of base pay | Company policy, [most often set by years of service and salary](https://www.shrm.org/topics-tools/news/talent-acquisition/organizations-expanding-severance-benefits-survey-finds) | Movable, especially with long tenure | | Health coverage | [COBRA lets you keep the group plan, but you may pay up to 102% of the premium](https://www.dol.gov/general/topic/health-plans/cobra) | Very movable: ask the company to pay the premium for some months | | Accrued PTO payout | Policy or state law | Often owed anyway; confirm it in writing | | Bonus or commission already earned | Your plan documents | Worth asking about if the payout date falls after your exit | | Equity vesting | The equity plan | Sometimes accelerated in big layoffs | | Outplacement or job-placement help | A vendor contract | Often an easy ask; many companies already contract a vendor | | Reference wording and non-disparagement | The agreement itself | Costs the company nothing today | | Release of claims | The agreement itself | This is what they're paying for | Here's what most laid-off people get wrong: they read the number as charity, feel grateful, and sign on day one to make the bad feeling stop. The real mechanism runs the other way. In a 2019 survey of 1,500 HR professionals by RiseSmart, a career-transition vendor, [about half of organizations ask employees not to file legal claims before offering severance](https://www.shrm.org/topics-tools/news/talent-acquisition/organizations-expanding-severance-benefits-survey-finds). A signed release closes off lawsuits and caps the company's liability. The faster you sign, the more value you hand over for free. Your leverage peaks at the exact moment you feel least like using it. ## What is a typical severance package? There's no legal standard in the U.S., so "typical" is a range set by company policy. Employment attorney Robert Ottinger told CBS News that [a week of pay per year of service is the low end and four weeks per year is generous](https://www.cbsnews.com/news/tech-company-layoffs-severance-package/). In the RiseSmart survey, [72% of respondents said severance is most often calculated from years of service and salary](https://www.shrm.org/topics-tools/news/talent-acquisition/organizations-expanding-severance-benefits-survey-finds), and tenure gates are common: nearly 40% require five years of service before severance applies at all. Big employers set the high end. In its January 2023 layoffs, CBS reported, [Google offered a minimum of 16 weeks' salary plus two weeks per additional year, accelerated vesting and six months of health care](https://www.cbsnews.com/news/tech-company-layoffs-severance-package/). Those components weren't won at the negotiating table. They were standard, which tells you that health coverage, vesting and job-placement help are normal parts of a package, not exotic favors. So read your offer against two questions. How many weeks per year of service is this? And which of the rows in the table above are missing entirely? A missing row is usually an easier ask than more weeks. ## Is a severance package required by law? In the U.S., generally no. The Department of Labor says plainly that [there is no requirement in the Fair Labor Standards Act (FLSA) for severance pay](https://www.dol.gov/general/topic/wages/severancepay), and that severance pay is a matter of agreement between an employer and an employee. One exception: if your employer has a formal severance plan, it may be an ERISA benefit plan, and the DOL's Employee Benefits Security Administration can help if you were denied what the plan promised. Only [44% of organizations in the RiseSmart survey offer severance to all workers](https://www.shrm.org/topics-tools/news/talent-acquisition/organizations-expanding-severance-benefits-survey-finds). What federal law does require, for larger layoffs, is notice. Under the WARN Act, an employer [shall not order a plant closing or mass layoff until 60 days after it serves written notice](https://www.law.cornell.edu/uscode/text/29/2102), and the Act generally covers [businesses with 100 or more employees, excluding part-time employees](https://www.law.cornell.edu/uscode/text/29/2101). Whether your company gave that notice, or paid in lieu of it, shapes how much room there is. A company already on shaky legal ground has more reason to deal. **India is different.** The Industrial Relations Code, 2020 [took effect on November 21, 2025](https://employmentlaw.lkslaw.com/labour-codes/industrial-relations), according to the law firm Lakshmikumaran & Sridharan. Under Section 70 of the Code, a worker with at least one year of continuous service must get one month's notice (or pay in lieu) and [retrenchment compensation of fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months](https://www.labour.gov.in/static/uploads/2025/07/682a44b5426bff2c1f4943ee1b2fd566.pdf). Section 83 adds a [Worker Re-Skilling Fund: the employer pays in fifteen days' last-drawn wages per retrenched worker, which is credited to that worker within 45 days](https://www.labour.gov.in/static/uploads/2025/07/682a44b5426bff2c1f4943ee1b2fd566.pdf). The catch: Section 2(zr) [excludes anyone "employed mainly in a managerial or administrative capacity" and supervisors drawing more than ₹18,000 a month](https://www.labour.gov.in/static/uploads/2025/07/682a44b5426bff2c1f4943ee1b2fd566.pdf) from the definition of "worker". If you're a manager at a tech company in Bengaluru, your package likely rests on your contract and company policy, which means it's negotiable in the same way a U.S. one is. Rules vary by state, country and contract, and this is general information as of October 2026, not legal advice. If a lot of money or a possible claim is at stake, an hour with an employment lawyer is cheap. ## Can you negotiate a severance package? Yes, and most people never try. In a 2023 YouGov survey of 1,202 U.S. adults for JustAnswer, an expert-advice platform, [only 42% of people who received severance at their last layoff negotiated it, meaning 58% did not](https://www.prnewswire.com/news-releases/new-survey-from-expert-platform-justanswer-reveals-45-of-the-us-workforce-are-worried-about-getting-laid-off-and-21-of-americans-have-been-laid-off-without-any-severance-pay-301811022.html). Employment attorney Sahara Pynes told CBS News: ["We get lots of people who get substantial enhancements just by asking."](https://www.cbsnews.com/news/tech-company-layoffs-severance-package/) Not by threatening. By asking. She added that those people have usually been there a while, and that mass layoffs at big companies rarely allow individual exceptions. The law builds in time to ask, at least for older workers. The EEOC says an employee [age 40 or older must get at least 21 days to consider a release, 45 days if the layoff covers a group, and 7 days after signing to revoke](https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements). The regulation adds that the [7-day revocation period "cannot be shortened by the parties, by agreement or otherwise"](https://www.law.cornell.edu/cfr/text/29/1625.22). The same EEOC guidance requires the agreement to advise you in writing to consult an attorney. That's a cooling-off window written into federal law. Use it. Even if you're under 40, Indeed's guide is blunt: [it's in your best interest to wait before signing any paperwork](https://www.indeed.com/career-advice/career-development/negotiate-severance-package). The waiting isn't stalling. It's the negotiation. | Your move on day one | What it signals | What it costs you | | ------------------------------------ | ----------------------------------------- | ----------------------------------------------------- | | Sign immediately | "I'll take whatever ends this" | Every day of the review window | | Say "I'd like time to review this" | "I'm reading this as a contract" | Nothing; the offer doesn't vanish because you read it | | Ask one specific question in writing | "There's a real person on the other side" | Nothing, and it often moves the terms | ## What's negotiable beyond the weeks of pay? More than the headline number, and the rest is often easier to move. Indeed's guide lists the levers most people never pull: [accrued PTO, continued medical insurance, outplacement services, the vesting timeline for stock options, how references will be handled, and nondisclosure terms](https://www.indeed.com/career-advice/career-development/negotiate-severance-package). Each is a separate budget line or policy choice, so a "no" on cash is frequently a "yes" on one of them. Health coverage is the sleeper. If your employer had 20 or more employees, COBRA generally lets you continue group coverage for [up to 18 months after a termination, at a premium that can reach 102% of the plan's cost](https://www.law.cornell.edu/uscode/text/29/1162). That full premium is a shock for most people, since the employer was paying a big share of it. Asking the company to cover COBRA for three or six months is a defined, budgetable cost, which tends to make it an easier ask than more weeks of cash. This is the same logic as [negotiating the parts of an offer that aren't capped when base salary is](https://praxy.me/blog/salary-negotiation-without-competing-offer). The budget lines differ, but the move is identical: when one door is locked, ask which doors aren't. ## How do you ask for a better severance package? Ask once, in writing, with specific items and a reason for each. Calm and specific beats apologetic and vague every time. Picture a senior analyst, six years in, offered six weeks of pay and nothing else. > **Weak version:** "I was wondering if there's any chance you might be able to do a little better on the severance? I totally understand if not, I don't want to be difficult." > > **Strong version:** "Thank you for the package. Before I sign, I'd like to discuss two items. Given my six years here, I'd like to bring the severance to twelve weeks, and I'd like the company to cover my COBRA premiums through March while I search. Can we look at those together?" The weak version makes "no" the path of least resistance. The strong one names items, attaches each to a reason, and hands your manager something concrete to take to HR. You're writing their internal justification for them. Put it in email. Writing is unhurried, it forces the request through the people who can approve it, and it leaves a record. A tearful "can you do better?" in the exit meeting is the easiest thing in the world to forget. ## Is severance pay taxed at 40%? No, there is no special 40% severance tax, though the withholding can feel like it. The IRS says [you must include in income amounts you receive as severance pay](https://www.irs.gov/publications/p525), and its 2026 employer guide lists severance pay as supplemental wages, which employers can withhold federal income tax on at an [optional flat 22% (37% is mandatory on supplemental wages above $1 million in a year)](https://www.irs.gov/publications/p15), or by combining it with your regular pay and using the normal tables. On top of that come [Social Security at 6.2% (on wages up to $184,500 in 2026) and Medicare at 1.45%](https://www.irs.gov/publications/p15), plus any state tax. Stack those and a lump sum can lose close to a third or more at payout. Withholding isn't your final tax bill. If your income drops for the rest of the year, some of it may come back at filing. That's also why some people ask for severance as salary continuation instead of a lump sum, or split across two tax years. Run the numbers with a tax professional before you choose; your situation decides which is better. ## Should you accept a severance package, or push back? (the part nobody mentions) Usually accept, after one good ask. This advice assumes leverage not everyone has, and pushing in the wrong situation can backfire. Plenty of people get nothing at all. In the JustAnswer survey, [21% of Americans have been laid off without any severance](https://www.prnewswire.com/news-releases/new-survey-from-expert-platform-justanswer-reveals-45-of-the-us-workforce-are-worried-about-getting-laid-off-and-21-of-americans-have-been-laid-off-without-any-severance-pay-301811022.html). If you're short on tenure, at a small company, or the offer already beats policy, your floor is lower than this post's framing suggests. Ask anyway, but expect a no and be ready to sign. There's a relationship cost too. If you're senior in a small industry, a bitter fight over two extra weeks can follow you, because [the real reference check is often the backchannel](https://praxy.me/blog/the-real-reference-check-is-the-backchannel). Weigh the marginal dollars against a network you'll need for years. | Your situation | Sensible move | | ---------------------------------------------- | ---------------------------------------------------- | | Short tenure, offer already at or above policy | Ask once for a non-cash item, then sign | | Long tenure, offer below one week per year | Ask for more weeks plus COBRA coverage | | Possible discrimination or retaliation claim | Talk to an employment lawyer before signing anything | | Group layoff, you're 40+ | Use the full 45 days; read the group disclosures | And drop the shame. Layoffs [spread by contagion and imitation more than by cold analysis](https://praxy.me/blog/layoffs-are-contagious-not-rational), so your role disappearing is a budget decision, not a verdict. You're a counterparty to a transaction, not a defendant asking for mercy. ## What to do now 1. **Don't sign anything the day you're told.** Say "thank you, I'd like to take time to review this." If you're 40 or older, you have at least 21 days, often 45. 2. **Read the release, not just the number.** Find the clause where you give up your right to sue. That's what your signature is worth. 3. **Check your package against the table above.** Note the weeks per year of service and every row that's missing. 4. **Pick two asks and send one calm email.** More weeks, COBRA coverage, vesting or outplacement, each with a reason. Then let them route it. 5. **Decide your escalation line in advance.** Know whether a "no" means you sign, push once more, or call a lawyer. 6. **Start the rest of your first week.** Severance is step one of [what to do when you get laid off](https://praxy.me/blog/what-to-do-when-you-get-laid-off); benefits, your story and your network come next. _Holding a severance agreement you haven't signed yet? Send it to Praxy on WhatsApp. I'll read the release with you, flag what's missing against a typical package, pick your two strongest asks, and draft the email before your review window closes._