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Why the Big Severance Check?

    Q:  After working for over a year as a manager at a large company, I was unexpectedly asked to resign.  I was offered a severance package equivalent to a few months’ pay, but there’s a catch.  In order to get the big check, I must sign an agreement –several pages of single-spaced legalese- where I wave all my rights to sue the company. 

     I’m suspicious of their offer.  It makes me wonder if they know they did something illegal and are covering their back side.  Have you heard of this?

     A: Yes, I’ve had the unfortunate task of handing those packages to employees more times that I care to remember.  They’re called separation agreements.  They’re commonly used when large companies ask an employee to resign, especially if they’re in management.  They’re also frequently used during layoffs, or whenever a substantial severance is offered.

     You’re mistaken to suspect that the offer of a separation agreement implies any company wrong doing.  However, you’re correct in thinking the company is covering their “assets”.  From their point of view, this is basic risk management.  Companies -especially large ones with deep pockets- would much rather give an employee a large chunk of their salary to part ways peacefully than to worry about defending an unfounded, frivolous lawsuit later.  It’s simple, if a $10,000 or $20,000 severance check can prevent a $100,000 or $200,000 legal bill later, it makes perfect business sense.  In other words, they’re buying some insurance, and you get to keep the premium.

     It’s no picnic have lost your job.  But, I see several silver linings if you accept the offer:

    • You’ll be able to truthfully say on future applications that you resigned from that position. 
    • You have some cushion money, so if you find a job sooner than the severance runs out, you’ll have some savings. 
    • You may have been unhappy or forcing yourself to fit there, now you can start fresh somewhere else, plus the economy is improving.

     Lastly, if they offered outplacement or job-search assistance, take it.  These services offer a great opportunity to self-assess, learn something new about your self, and maybe even change direction.  Good luck.

     © Copyright Eva Del Rio

    Eva Del Riois a human resources consultant and business owner.   Send questions to or find her under Workplace Savvy Facebook. 

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