Severance Package: How to Negotiate Severance (2026)

A severance package is the money and benefits your employer offers when your job ends, usually in return for you signing an agreement that releases them from legal claims. You can often negotiate it. Ask for the offer in writing, take the time you're given, work out what you're giving up, and ask for specific improvements with reasons.

The rules differ a lot by country, so each section below says where it applies. This is general information, not legal or financial advice. If the amount is large or you think you were treated unlawfully, speak to an employment lawyer (US), an independent adviser (UK) or your provincial employment standards office (Canada) before you sign.

If you've only just been told, start with our checklist for the first days after a layoff, then come back here.

What is a severance package?

It's whatever your employer offers on top of what they already owe you when you leave. In the US, the Department of Labor says severance pay is "a matter of agreement between an employer and an employee" and is usually based on how long you worked there. Our glossary entry on severance pay covers the basics.

A package can include some or all of these. Each one is something you can ask about.

Is an employer required to give severance?

It depends on the country.

• United States: No federal requirement. The DOL says there is "no requirement in the Fair Labor Standards Act (FLSA) for severance pay". Your contract, an employee handbook or a company severance plan may still promise it. If you were entitled under an employer plan and didn't get it, the DOL points you to its Employee Benefits Security Administration.
• United Kingdom: If you're made redundant and have worked for your employer for 2 years or more, you're usually entitled to statutory redundancy pay. Anything above that comes from your contract or is negotiated, often through a settlement agreement.
• Canada (federally regulated employers): The Canada Labour Code requires severance pay once you've completed 12 consecutive months of continuous employment: the greater of 2 days' wages for each full year of service or 5 days' wages. If you work for a provincially regulated employer, check your province's employment standards rules instead.

What is in a severance agreement?

The agreement is the document you sign to get the package. The part that matters most is the release of claims (also called a waiver): you agree not to sue your employer over your employment or how it ended, in exchange for the payment.

United States: the release, and extra rules if you're 40 or over

The EEOC's guidance on severance waivers says the payment has to be something extra: you can't be paid for the release with money or leave you'd already earned.

If you're 40 or over, the Older Workers Benefit Protection Act sets minimum standards for a valid waiver of age discrimination claims under the ADEA. According to the EEOC, the agreement must:

• be written so you can understand it
• refer to the Age Discrimination in Employment Act by name
• advise you in writing to consult a lawyer
• give you at least 21 days to consider it, or at least 45 days if it's part of a group layoff or exit programme
• give you 7 days after signing to revoke it
• not waive claims that arise after you sign
• give you something of value beyond what you're already entitled to

In a group programme, the employer must also tell you who was covered and the job titles and ages of those selected and not selected.

The EEOC also says no agreement can stop you filing a charge with the EEOC or taking part in an EEOC investigation, and you don't have to repay severance to file one.

United Kingdom: settlement agreements

In the UK the equivalent is usually a settlement agreement. Acas says that for it to be legally valid, you must get advice from a relevant independent adviser, who is named in the agreement. The Acas Code of Practice recommends allowing at least 10 days to consider one, and says employers should consider paying for your advice, though they don't have to. Asking them to cover the adviser's fee is a normal request.

Can you negotiate a severance package?

Often, yes, though not always. The EEOC notes that in group exit programmes the terms are typically set by the employer and are often non-negotiable. Individual exits usually have more room. Asking politely and in writing rarely costs you anything.

How to negotiate severance, step by step

1. Don't sign in the meeting. Thank them, ask for everything in writing, and ask how long you have.
2. Separate what you're owed from what's offered. Final salary, accrued holiday (where your contract or local law says it's paid out) and earned commission are not concessions.
3. List what the release asks you to give up. If you have a possible claim (for example discrimination, or unpaid wages), the release has more value to them.
4. Build your case. Length of service, results, a bonus you were close to earning, equity about to vest, how hard your role will be to replace in your market.
5. Pick two or three asks. More money, longer health cover, extra vesting, a later end date, an agreed reference. A short, specific list gets further than a long one.
6. Ask in writing, to the right person. Usually HR, copying your manager if that helps.
7. Get the final version in writing and check every change was made before you sign.

Example scripts

These are examples to adapt, not legal wording.

Asking for time (in the meeting): "Thank you for telling me directly. I'd like to read the agreement properly before I respond. Could you send it to me in writing, and confirm the deadline?"

Asking for more pay (by email): "Thank you for the offer. I've been with the team for six years and led the migration that [result]. Given that, and that the release covers all claims, I'd like to ask for [X weeks] of pay rather than [Y]. I'd also ask that the company pays towards my health cover until [date]. I'm keen to sign quickly if we can agree this."

Asking about unvested equity or bonus: "My next vesting date is [date], six weeks after my end date. Would the company consider accelerating that tranche, or moving my end date to [date]?"

Asking for an agreed reference: "Could we agree the wording of a reference and how my departure will be described to people who call? That would help me a great deal in my search."

How much severance should I get?

There is no single legal figure in the US. The DOL says severance is usually based on length of employment, and the amount is whatever you and your employer agree. Look at what your contract, handbook or the company's severance plan says, and what colleagues in the same layoff were offered, if you know.

There are legal minimums in some places: UK statutory redundancy pay (use the GOV.UK calculator) and the Canada Labour Code minimum above for federally regulated employers. A negotiated package can be higher than either.

Is severance pay taxable?

• United States: Yes. The IRS says "severance pay and unemployment compensation are taxable", and so are payments for accumulated vacation or sick time. The IRS suggests having enough tax withheld or making estimated payments to avoid a large bill. Publication 525 adds that if you accept less severance in exchange for outplacement services, you still include the full, unreduced amount in income.
• United Kingdom: GOV.UK says "statutory redundancy pay under £30,000 is not taxable". Other parts of a termination payment, such as holiday pay, unpaid wages and bonuses, are treated according to what they are.
• Elsewhere: Check your national tax authority, or ask an accountant before you agree how the payment is split.

Can you get unemployment while on severance?

It depends on where you live.

• United States: Each state runs its own unemployment programme and sets its own rules, so whether severance delays or reduces benefits varies by state. Report it accurately when you file and ask your state agency. Our guide to unemployment if you're fired, laid off or quit explains how to file.
• United Kingdom: Your savings don't affect New Style Jobseeker's Allowance. Universal Credit is only for people with £16,000 or less in savings, so a large payment can matter there (GOV.UK).
• Canada: Severance normally counts as earnings for EI. Under a temporary measure, separation earnings such as severance, vacation pay and pay in lieu of notice are not deducted from benefits for claims or allocations starting between 30 March 2025 and 9 October 2027.

Checklist before you sign

• I have the agreement in writing and know the deadline.
• I know which payments I'm owed anyway, and which are extra.
• I understand which claims I'm releasing.
• I've checked any non-compete, non-solicit or confidentiality clause against the jobs I might apply for.
• I know when and how the money is paid and how it's taxed.
• I know what happens to my health cover, pension or 401(k), and equity.
• I've agreed how my exit will be described and who gives references.
• If the amount is significant or I have a possible claim, I've had independent advice.

What next

Once the paperwork is done, the job is getting back into work. Decide how you'll describe the exit (our guide to laid off vs fired helps with wording), then focus on showing the next employer what you can do. You can practise on a job simulation of the work in your target role and get a scored report on where you lost marks, so you know what to brush up before interviews. It's free to start.

FAQs

Should I sign a severance agreement straight away?

No. Ask for it in writing and use the time you're given. In the US, if you're 40 or over, the EEOC says you must get at least 21 days (45 in a group programme) and 7 days to revoke after signing.

Can I negotiate severance after being laid off in a group?

You can ask, but the EEOC notes that group programme terms are often non-negotiable. Individual items such as an end date, a reference or equipment are sometimes easier to change.

Does signing a severance agreement stop me filing a discrimination complaint?

In the US, the EEOC says an agreement cannot stop you filing a charge with the EEOC, though a valid release can limit what you can claim for yourself. Get legal advice if you think you were discriminated against.

Is severance pay required by law in the US?

No. There's no FLSA requirement. It's whatever your contract, plan or agreement says.

Is redundancy pay the same as severance?

In the UK, statutory redundancy pay is a legal minimum for eligible employees who are made redundant. A severance or settlement payment is negotiated and can sit on top of it. See our redundancy glossary entry.

Sources

Checked 2 November 2026. This is general information, not legal or financial advice.

• US Department of Labor: Severance pay
• US EEOC: Understanding waivers of discrimination claims in employee severance agreements
• US Department of Labor: Unemployment insurance fact sheet
• IRS: What if I lose my job? and Publication 525
• GOV.UK: Statutory redundancy pay, Tax and National Insurance, Finding work and claiming benefits after redundancy
• Acas: Settlement agreements
• Government of Canada: Terminations (Canada Labour Code) and EI temporary measures