Severance shows up at the worst possible moment to read a contract carefully. You’re angry, probably at someone specific. You’re embarrassed even if you know you shouldn’t be. You’re worried about money and insurance and what you’re going to tell people, and underneath all of it you want this chapter closed.
The packet is designed, in some sense, to be signed in that state. Cash number up top, the rest in form-letter prose, a clock running down. Twenty-one-day and forty-five-day review periods exist in federal law for workers forty and older because regulators understood that someone in this emotional state is not a competent signer of releases. Everyone else gets less protection and is expected to sign anyway. Plenty of smart people, myself included, do.
First, do this: take the week. Don’t sign right away.
What’s in a default severance package
It helps to know what’s standard before deciding what to push on. Most knowledge-work severance in the US follows a similar template:
- Cash, paid either as a lump sum or as salary continuation over some number of weeks. A common default at tech companies is one to two weeks of pay per year of service, with a floor for short-tenured employees and heavier packages for senior roles. Executives negotiate in months, not weeks.
- Benefits continuation in the form of COBRA eligibility, which by default is entirely on you. Employer-paid COBRA for any number of months is a negotiated addition.
- A release of claims, usually general and sweeping. A non-disparagement clause, usually one-sided. A cooperation clause obligating you to help with future litigation, usually open-ended. Any non-compete or non-solicit that was in your original employment agreement, revived or restated.
- Vested equity handled per the plan documents. For options, that usually means the ninety-day post-termination exercise window kicks in. For RSUs, anything unvested as of your departure date is forfeited.
That’s the baseline. Everything on it is a starting point.
Hidden levers
For clients with meaningful equity, the cash number is rarely the most valuable part of the negotiation. Two specific equity asks tend to matter more.
The first is an extended post-termination exercise window on vested options. Twelve months is a reasonable starting ask, and some packages get to years. Even if your options were ISOs, they convert to non-qualified options ninety days after termination by statute, regardless of what the company agrees to, so the tax treatment gets worse either way. What you’re buying with the extension is the ability to wait for a liquidity event before writing a check. Without it, you decide inside ninety days whether to spend potentially tens of thousands of dollars exercising options in a company whose stock you cannot sell. With it, you keep the option alive until there’s a tender, secondary, or IPO.
The second is accelerated vesting on unvested equity. A conventional ask is for whatever would have vested in the next three to six months, with more aggressive versions going out to twelve. Even partial acceleration is meaningful when equity is a significant piece of your compensation. If the acceleration language in your original grant has a “termination without cause” trigger, make sure the separation paperwork characterizes the termination correctly, referencing “without cause” explicitly where it applies.
For clients whose equity is underwater, the ask looks different. Continued vesting through the severance period can preserve optionality if the stock recovers. Repricing is unusual for individuals but occasionally available company-wide.
Cash and benefits
After equity, these are where the most movable dollars live.
- Additional weeks of pay. Tie the ask to tenure, to a specific financial need (mortgage, school tuition, visa sponsorship runway), or to market comparables. Executives regularly land six to twelve months.
- Employer-paid COBRA. The market for tech and financial services has been trending toward six to twelve months of full employer coverage; three to six months is easier to get at smaller companies. Family coverage runs roughly eighteen hundred to five thousand dollars a month, so the ask is worth real money.
- Prorated bonus or commission for the current year. If your anniversary is a few months away or the bonus pool is about to be decided, this is a straightforward ask. Not always granted, but sometimes.
- Unused PTO payout, if your state doesn’t already require it. California, Colorado, Montana, and Nebraska do. Many others don’t.
- Outplacement services. Career coaching, resume help, transition counseling. Cheap for the company, valuable to you.
Contract terms that cost nothing to ask for
Some of the highest-leverage asks in severance have nothing to do with money. They’re changes to the language of the contract.
- Non-compete and non-solicit narrowing. A shorter duration, a tighter geographic scope, a list of carve-out companies, or outright elimination. If you’re being terminated without cause, the argument for enforcing a restriction written when the employer chose to keep you is weak.
- Mutual non-disparagement. The default is you agree not to disparage them. Ask for the reverse. It costs them nothing unless they plan to disparage you.
- Characterization of departure. Resignation, termination, or mutual separation each carry different implications for unemployment, future job searches, and how references go. Worth getting right.
- Reference language, agreed on in writing. A commitment to provide a neutral or positive reference, with specific wording if possible.
- Cooperation clause caps. Require the hours to be time-capped and compensated at a reasonable hourly rate.
- Release carve-outs. You cannot release workers’ compensation claims, unemployment claims, whistleblower protections, or vested retirement benefits, and trying to do so makes the release unenforceable in some states. Carve them out explicitly. Add carve-outs for indemnification for work you performed, for any vested equity rights, and for claims arising after the signing date.
Procedural things worth knowing
If you’re forty or older and being asked to release age discrimination claims, federal law gives you twenty-one days to consider the agreement, or forty-five days as part of a group layoff, plus seven days after signing to revoke. Shorter consideration periods are unenforceable for that age group. Most people take one or two days. Take the twenty-one.
If your employer has a hundred or more employees and this is a layoff of fifty or more at a single site, the WARN Act requires sixty days of advance notice. If you got less, the difference is usually payable as additional severance.
Independent counsel on a severance agreement typically runs a few hundred to a couple thousand dollars. For anyone with meaningful equity or a restrictive non-compete, that is roughly the cheapest financial advice available anywhere.
Where to watch your step
COBRA subsidies can interact with unemployment insurance in some states. Salary continuation, as opposed to a lump sum, can also shift when unemployment benefits kick in. Check state rules before deciding which form the cash should take.
Extended exercise windows convert ISOs to NSOs. That changes the tax math. For some clients, the right trade is more cash now and a shorter window; for others, it’s less cash and a longer window. Know the numbers before negotiating.
Some releases include language attempting to release claims that cannot be released as a matter of law. It’s often unenforceable, but it still gets signed. An hour with an employment lawyer catches it.
State PTO payout law varies widely. If your state doesn’t require payout, the company’s policy governs, which means the payout is a line item to negotiate, not a guarantee.
The point
The severance document is the last contract between you and the employer. For clients with meaningful equity, the terms on that document often end up worth more than every cash line item put together, and the asks that get those terms changed usually take less than a week and a few emails to make.
You’ll never feel less like negotiating than in that moment. It also happens to be the last moment you can.
Nothing in this essay is investment, legal, or tax advice. It’s a general discussion of concepts I find useful in my work and shouldn’t be relied on as a recommendation for your specific situation. Talk to a qualified advisor (ideally one who knows you) before acting on anything here.
