New York’s Magic Formula for Severance Pay
People want to know how their severance pay was calculated. Some have asked if I know the formula. A formula does not exist. Severance pay is unregulated. Companies can pay whatever amount they want, including zero.
Back in the pre-recession days, companies would consider a person’s years of service and their rank or position in the firm when setting severance pay. But now, the gloves are off. Today, there is only one factor in determining severance pay – what is the lowest amount possible that will induce a person to waive their rights. Companies are bargain hunting. They want your waiver and they want it for less. They want you to go quietly and cheaply. But ultimately it is up to you – you don’t have to sign the agreement. You can say no and that might be a good way to test the company to find out what they are really willing to pay. You can’t get a good severance package unless you are willing to walk away. Most people, however, don’t have it in them to push back, they just take the first offer. Only the shrewd get the really good deals.
