As a result, it's important to leave the company on good terms and make sure you've been compensated fairly - making the transition as easy as possible for you and your employer. Understanding the steps needed to negotiate a fair severance package is vital to help companies progress smoothly and to help workers manage the next phase of their professional careers.
What is Severance Package?
A severance package is simply the compensation given by an employer to an employee after their employment is terminated. It is usually given as a form of goodwill, and its benefits can range from financial, medical, legal, or mental support.
Severance packages are beneficial to both the employee and the companies themselves. By compensating its departing employees properly, companies can reward workers who have had long tenures, maintain positive relationships and avoid potential future legal disputes.
Why are foreign workers let go?
Large multinationals and mid-level companies with a global footprint often have to let go of their foreign employees to cut costs and rebalance their international operations.
Internal restructuring
Large corporations with many subsidiaries are constantly tinkering with their strategy to maximize their international presence. In challenging economic times, this often involves shifting their operations to the countries which have the greatest profit potential. As a result, foreign workers in smaller subsidiaries are sometimes the first to be let go in order to reduce costs for the business overall.
Global factors
Events such as the COVID-19 pandemic have shown how volatile the business environment can be and the measures companies must take to adjust.
The travel restrictions enforced by many governments played a huge part in how businesses managed their day-to-day operations – many having to let go of their foreign workers to respond to border closures.
Do foreign workers receive severance pay?
Severance pay across the board is not required to be paid by a company. It is generally paid as a measure of goodwill and is usually given to employees who have been loyal or have performed well for the company over a period of time.
Whether you are a foreign or local worker, the decision to grant you compensation after your contract is terminated is completely dependent on the policy of the company you work for.
Tips for the best severance package
If you've ever been let go, you'll know it can be a daunting task to negotiate any type of agreement with your employer. However, the good news is that once you know the right way to go about it, you can really make sure you leave with a package that benefits you and your company.
Ask what you want
Before you even start thinking about money, it's important to reflect on the time you spent working. What did you enjoy? What things did you learn? What type of challenges are you looking for next? What was your work-life balance like? Once you consider what you really want, it will give you a rough idea of what kind of package you'll need to make the next phase of your professional life as smooth as possible.
Understand what benefits are available
There is often a misconception that severance pay is solely financial. Whilst this is the most common form of compensation by employers, there are many other types of benefits that are available. It is important to understand what these different types are so you can see if your company can give you the most comprehensive pay package possible.
Paid leave
Many professions, particularly in finance and law, require employees to work on a project-by-project basis, and therefore, workers tend to save up their leave until their respective deadlines finish. As a result, when these workers are let go, they have a large amount of leave that has been unused. Employers often payout this accrued leave and any sick days as part of their severance pay packages.
Health benefits
Health benefits are an example of a non-monetary incentive that can be offered in a severance package. For example, in the US, workers who have been let go can still opt to stay on their company's health insurance plan to cover any medical treatment they might require in the future.
Stock options
If you work for a publicly-traded company, your pay is made up of both a salary and a bonus, often paid through being awarded company stock.
When you are asked to leave, you may be able to release your options and walk away with a sizeable amount of cash.
Specialized references
If you have worked in a niche industry where you've been required to complete highly specialized projects, you may be able to get your employer to sign off on your most impressive work. This is great for future job prospects as it provides a written record from your executives to document the specific work that you've carried out. This can be extremely helpful, particularly if you are looking to find work in a similar role or industry.
Learn the industry standard
Once you receive your compensation package, no matter how good it may seem, try to get an understanding of some other comparative offers.
Compensations naturally vary due to several different factors such as time worked, seniority, and overall performance, so it can sometimes be hard to find a benchmark to compare.
However, if you can find similar people in the industry who have also experienced layoffs, you can gauge whether your offer is in the right ballpark.
Forums such as Reddit and LinkedIn industry groups are examples of communities that are open to divulging information that typically may not be given in a normal environment.
Seek advice
Before you start signing away anything, it's vital that you get an expert to run through your offer to make sure that it's fair but also to give you the best chance of negotiating something in your favor.
You should ensure that after you go through the contract thoroughly, you consult a lawyer to read all the finer details and explain any technical jargon in your contract so you are fully aware of what you are getting.
Lawyers can also identify areas where you have a strong case to negotiate. For example, revenue generated from any pending deals that may close after you leave.
These areas of your package are more complicated and require legal expertise to structure an offer accordingly.
Ask how you can help
In order to get a package as best as possible, it's best to keep your employer onside. Always make sure to ask what you can do to help to make the transition as seamless as possible.
Transition schedules
In very high skilled industries, roles usually require a lot of specialized knowledge, which is only gained through experience. For those who work in roles like these, ask your employer if you can continue to provide value in a mentoring/consulting capacity to share some of the wisdom gained over the years.
Non-compete agreements
Jobs that require keeping a high client retention rate often want to make sure that you don't leave with all their best customers. Companies recognize that their best talent will usually get poached by a competitor and will be after these clients.
Many companies realize this and will make compensation accordingly - signing a non-compete agreement will make sure that you will be paid to not make contact with their customers for a certain period. So they get to keep their clients, and you get to walk away with some extra cash.
Training bundles
When an employee is asked to leave, all their previous work is usually scattered and left untouched. Ask if you can take some extra time to organize all your work and catalogue it to help the person taking over your position.
Training bundles are an example where you can collate everything you've done and provide feedback about the challenges and successes you've had. This makes it easier for your co-workers to reference your material when you leave and also gives new starters a blueprint to work from.
In conclusion, foreign workers should not underestimate the value they bring to their companies. By understanding what they are entitled to and the benefits on offer, they will be easily able to receive the compensation they deserve – making their transition beneficial for themselves and for their employer.
