A severance offer is a proposal, and you can ask for changes before you sign. In the United States, federal wage law does not require severance pay, so the package is an agreement between you and your employer, usually given in exchange for a release of legal claims. Take the agreement home, note the deadline, pick the terms that matter most and ask for them in one written message. If you are 40 or older, federal law gives you at least 21 days to consider a waiver of age discrimination claims.
Key takeaways
- Do not sign in the meeting. Ask for the documents and the deadline, and read everything at home.
- Severance is paid in exchange for a release of claims. What you give up is part of the price.
- More than the amount is negotiable: health coverage, payment timing, bonus, equity, references and restrictions.
- Workers 40 and older get at least 21 days to consider a waiver of age claims (45 in a group program) and 7 days to revoke after signing.
- Ask once, in writing, with reasons, and get every change into the agreement itself.
- See an employment lawyer if you suspect discrimination or retaliation, or if the stakes are high.
01
Is severance required, and can you negotiate it?
The U.S. Department of Labor says there is no requirement for severance pay in the Fair Labor Standards Act. Severance is “a matter of agreement between an employer and an employee” and is usually based on length of employment. So check first whether you are already entitled to something under an employment contract, an offer letter, a written severance plan or a union contract. If you were denied benefits under an employer’s severance plan, the department’s Employee Benefits Security Administration may be able to help.
Notice is a separate matter. Under the federal WARN Act, employers with 100 or more employees must generally give at least 60 calendar days’ advance written notice of a plant closing or mass layoff affecting 50 or more employees at a single site. Pay that covers a notice period is not the same as severance.
You can negotiate because the employer wants things too: your signature on the release and an orderly handover. In a large layoff with a fixed formula the amount may not move, but dates, benefits and wording sometimes can.
02
What can you ask for in a severance package?
| Term | What to ask for |
|---|---|
| Severance pay | More weeks, or a formula that counts bonus or commission as well as base pay |
| Payment timing | A lump sum or salary continuation, and the date of the first payment |
| Health coverage | Employer-paid premiums for a set number of months |
| Bonus and commission | A prorated bonus, and commission on deals already closed |
| Equity | Extra vesting, or more time to exercise options |
| Separation date | A later last day that carries you past a vesting, bonus or benefits date |
| Reference and wording | An agreed reference, a neutral description of your departure, eligibility for rehire |
| Restrictions | A narrower or waived non-compete, and non-disparagement that binds both sides |
| Job search help | Outplacement services |
Under COBRA, group health plans sponsored by employers with 20 or more employees generally have to offer continued coverage after a job loss, and the Department of Labor says you may be required to pay the entire premium, up to 102 percent of the plan’s cost. That makes employer-paid premiums worth asking for. And the IRS says severance pay is taxable, as are payments for accumulated vacation or sick time.
03
What are you signing? The release of claims
The Equal Employment Opportunity Commission describes a severance agreement as a contract that specifies the terms of an employment termination. In it you typically waive your right to sue the employer. Its checklist for employees: understand the agreement, check the deadlines, consider having an attorney review it, know what you are giving up, and confirm it does not ask you to release rights that cannot be waived.
According to the EEOC, a release cannot:
- Stop you from filing a charge with the EEOC or taking part in an EEOC investigation. A provision that tries is invalid and unenforceable.
- Waive age discrimination claims that arise after the date you sign.
- Rest only on something you were already owed, such as earned vacation pay, when it waives age claims. You must receive something of value in addition.
Read these clauses slowly: the scope of the release, non-disparagement, confidentiality, non-compete terms, and the conditions under which payments stop or must be repaid.
04
Review periods if you are 40 or older
The Older Workers Benefit Protection Act sets minimum conditions for a waiver of claims under the Age Discrimination in Employment Act. The EEOC lists them:
| Requirement | What the EEOC says |
|---|---|
| Time to consider | At least 21 days |
| Group programs | At least 45 days when the waiver is part of an exit incentive or other termination program offered to more than one employee |
| Time to revoke | 7 days after signing, which neither side can change or waive |
| Legal advice | The agreement must advise you in writing to consult an attorney |
| Wording | Clearly understandable, and referring specifically to rights or claims under the ADEA |
In a group program the employer must also tell you in writing which group was considered, the eligibility factors, the time limits, the job titles and ages of everyone eligible or selected, and the ages of people in the same job classification or unit who were not.
The EEOC adds three points that matter in a negotiation. The 21-day period starts over if the employer makes material changes to its final offer. You may sign sooner, provided your decision is knowing and voluntary and was not induced by fraud, misrepresentation or a threat to withdraw or alter the offer. And you are not required to return severance pay before bringing an age discrimination claim that challenges the waiver.
If you are under 40, these federal periods do not apply, and the deadline is normally whatever the agreement says. Ask for more time if you need it.
05
When should you get a lawyer?
Pay for an employment lawyer’s review when:
- You believe the termination was discriminatory or retaliatory, for example soon after a complaint, a medical leave or a request for accommodation.
- The package includes significant equity or deferred pay.
- A non-compete would limit your next job.
- You are pressed to sign on the spot.
- You do not understand a clause.
Ask whether the lawyer offers a flat fee for reviewing a severance agreement.
06
How to negotiate severance, step by step
- In the meeting, listen and take notes. Do not sign or agree to anything.
- Separate what you are owed from what is offered: final pay, accrued vacation under your employer’s policy and state law, vested equity, earned commission.
- Pick your top three requests.
- Write to the person who can approve them, usually HR. Give reasons: your length of service, your contributions, and how long a comparable job may take to find.
- Get every change written into the agreement. Do not rely on a promise made only in a call.
- Sign within the deadline, keep a copy, and note the revocation period and payment dates.
"I understand. I'd like to review the agreement carefully before I respond. Can you send me the full document and tell me the deadline for signing? And who should I contact with questions?"
Subject: Separation agreement: [Your name] Hi [Name], Thank you for sending the separation agreement. I've reviewed it, and I'd like to resolve this smoothly. Given [my X years with the company / my role in Y / the time it will take to find a comparable position], I'm asking for the following changes: 1. Severance pay of [number] weeks instead of [number]. 2. Company-paid health coverage through [month]. 3. [A prorated bonus for this year / an agreed reference / a separation date of [date]]. In return, I'm glad to [document my projects / help with the handover through [date]]. If we can agree on these points, I'm prepared to sign promptly. Best, [Your name]
Hi [Name], I'm reviewing the agreement and arranging for a lawyer to look at it. Could the deadline be extended to [date]? I want to give you a considered answer. Thank you, [Your name]
Apply for unemployment benefits with your state as soon as your job ends, and ask how the severance will be treated. Then start the first-30-days plan after a layoff and prepare how to explain a layoff.
FAQ
Frequently asked questions
Can you negotiate a severance package?
Yes. Federal wage law does not require severance, so the terms are an agreement between you and your employer, and you can propose changes before you sign. Even when a formula fixes the amount, health coverage, dates, references and restrictions are worth asking about.
How much severance should I ask for?
No federal law sets a formula. The Department of Labor says severance is usually based on length of employment, so ask HR how the offer was calculated. Base your request on your tenure, your level and how long a comparable job is likely to take to find.
How long do I have to sign a severance agreement?
If you are 40 or older and the agreement waives federal age discrimination claims, you must be given at least 21 days to consider it, or 45 days in a group program, plus 7 days to revoke after signing. If you are younger, the deadline is normally the one in the agreement.
Is severance pay taxable?
Yes. The IRS says severance pay is taxable, and so are payments for accumulated vacation or sick time. Make sure enough tax is withheld, or make estimated tax payments, to avoid a large bill at tax time.
Can I still file an EEOC charge after signing a severance agreement?
Yes. The EEOC says that even if your agreement uses broad language about the claims you release, you can still file a charge if you believe you were discriminated against, and that any provision trying to waive that right is invalid and unenforceable.
Sources
- EEOC: Q&A, Understanding Waivers of Discrimination Claims in Employee Severance Agreements: the OWBPA requirements, the review and revocation periods, and what a release cannot waive.
- U.S. Department of Labor: Severance Pay: that federal wage law does not require severance pay.
- U.S. Department of Labor: Plant Closings and Layoffs: the WARN Act’s 60-day notice requirement.
- U.S. Department of Labor: Continuation of Health Coverage (COBRA): who must offer continued coverage and what it can cost you.
- IRS: What if I lose my job?: that severance pay and payouts of accumulated leave are taxable.
Published by Jobbie and last updated on October 6, 2026. This guide is general information for job seekers, not legal, tax or financial advice. Spotted something wrong? Tell us.