Working: The Layoff Payoff

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Getting sacked doesn't mean you lose all leverage. By squeezing your employerfor a better severance package, you can turn your final day into a big payday.

VAN FREEMAN HAD just wrapped up another day at the Louisville, Ky., ladder manufacturer where he'd worked for nearly 27 years when he got a visit from the head of human resources and the production vice president. They had bad news: "They said they were downsizing," recalls Freeman, 51 years old, a production supervisor. Next thing he knew, he was handed his walking papers.

Freeman, who had always assumed he'd work there until retirement, was offered 20 weeks' severance pay, plus four weeks of vacation pay he'd earned. Medical coverage would continue over that time. "They told me that everyone was getting the same thing," says Freeman. "It was, 'Take this or nothing.'"

Only later, after talking to one of the other six laid-off workers, did he discover that some had gotten more. The differences were small, but still, Freeman felt cheated. He asked his attorney to press for better terms. After his lawyer put in a call, the company quickly obliged, offering two more months of severance pay and medical coverage — and a glowing letter of recommendation. "I was kind of surprised they gave me all this," Freeman admits.

Most people are so stunned when they lose their job that they simply accept what's offered. But the truth is, many companies will give more if pushed. "If they're offering you three weeks of severance, often they're prepared to give you at least five or six," says Richard Bayer, chief operating officer of the Five O'Clock Club, a career-counseling group based in New York. "Companies are more flexible than people think. No company wants disgruntled employees saying bad things."

So how can you press for more? To begin with, do what Freeman did and find out what other workers received. "Employers hate it when you do this, but everyone is loose-lipped about what they got," says Barbara Repa, vice president of HROne, a human resources Web site. "Knowledge is a powerful negotiating tool."

Play up your individual circumstances. "Remind them that your situation is unique and that they need to do better," says Bayer. "If you worked on a project that was important to the bottom line, ask them to consider that. If they relocated your entire family and you had to find the kids new schools, bring this up. Your mantra is, 'I just want to be treated fairly.'"

If it's more cash you're after, speak up quickly. "The first 10 people may have already grabbed the excess, and whatever flexibility the company had could be wiped out," says R. Craig Scott, founder of Executive Law Group, a Newport Beach, Calif.-based law firm. "There's no disadvantage to being first in line."

You might be given the option of getting your severance as continued salary or as a lump sum. Generally, it's best to get the money up front — especially if you think the company might go under. "Otherwise, it's get in line with the other creditors," says Repa. More taxes will come out initially, but, says Repa, "it's better to make a clean break. Put some of the money into finding a job." Getting the money in increments benefits mainly the employer. "It's their way of keeping employees in check, especially ones who signed a noncompete," says Scott. Consider this option only if the lump sum would be enough to put you in a higher tax bracket and a gradual payout would defer substantial income into the next year.

Money is not the only item on the table. You might ask your employer to extend your health coverage, particularly if you have a condition that would make it expensive to land insurance on your own. "It really costs companies very little to carry employees on their plan," says Bayer.

Outplacement service is often included in severance packages, but if you're counting on that to get you a new job, forget it. "It was really just a support group," says Debra Kelker, who received such a service when she lost her job as a quality-assurance coordinator at a Sara Lee office in Winston-Salem, N.C. "They handed out a list of outdated Web sites we should use to help us get a new job. And there were only a couple of phones and computers for 15 or 20 of us to use."

Consider asking your ex-employer for more cash in lieu of outplacement help. Or try to get the company to pick up the tab for an outside counselor — one "where you're the client, not the company," says Bayer. Through friends, Kelker found a free outplacement service in town that does more than hand-holding. For one thing, it provides networking opportunities by inviting back alumni. That has generated some strong job leads for Kelker.

In this latest rash of layoffs, companies have been dangling increased severance money in front of workers. The catch: They have to agree to certain terms. For instance, they might have to sign a nondisclosure contract, agree not to poach customers or waive their rights to sue the employer. Should you take the bait? Not if you suspect you have grounds for a discrimination case. "If you feel you were fundamentally treated unfairly — were all the other people who were fired black women over 40, or did you get the pink slip a month before your pension vested? — speak to an attorney first," says Repa.

Before you sign a nondisclosure agreement, get the company to specify what information it doesn't want you to reveal. If you're planning to get out of the industry anyway, there's little reason not to sign. Trevor Nicholson, laid off as a sales coordinator at an Internet company, was looking for a good excuse to try his hand as a musician. So when the company told him he would get double his severance — two months' pay — if he agreed not to reveal trade secrets, the 24-year-old New Yorker happily obliged. The way he sees it, the layoff "was a blessing in disguise."