The layoff email arrived on a Tuesday. The engineer had been at the company for three years—consistently strong performance reviews, well-regarded on his team, no warning signs. The severance offer: two weeks of pay and immediate termination of health benefits.
"Is that normal?" he asked me. "After three years?"
It was common, I told him. But it wasn't necessarily what he had to accept. Severance packages are almost always negotiable, and most engineers leave significant money on the table by accepting the first offer. In his case, he eventually negotiated eight weeks of severance and three months of continued health benefits—a $15,000 improvement from the initial offer.
I've advised over 150 engineers through layoffs and terminations at SmithSpektrum. The consistent pattern: companies offer less than they're willing to provide, and most people accept without pushback because they don't know better. Understanding how severance works—and how to negotiate it—can be worth tens of thousands of dollars at a moment when you need it most[^1].
Why Severance Exists
Severance isn't charity, and it's not a legal requirement in most US states. It's a transaction. You give up something—primarily your right to sue the company—and in exchange, you receive money and benefits.
The core element of every severance agreement is the release of claims. You agree to waive any legal actions against the company—discrimination claims, wrongful termination claims, whatever you might theoretically pursue. In exchange, they give you a severance package. The more they worry about potential legal exposure, the more they'll typically offer.
Companies also pay severance for other reasons. Reputation matters—former employees talk, and how a company treats departing employees affects its ability to hire. Companies often want to rehire laid-off employees when circumstances change, and brutal severance makes that harder. And in layoff situations, the remaining employees are watching. Generous severance reassures them that they'll be treated fairly if the same thing happens to them.
Understanding these motivations helps you negotiate. You're not asking for a favor; you're in a negotiation where both sides have interests.
What Severance Packages Include
A complete severance package has multiple components, and engineers often focus too narrowly on the cash portion while ignoring elements that may be equally valuable.
Cash severance is the headline number. It's typically calculated as some number of weeks of your base salary. The standard range is two weeks per year of service, though this varies enormously by company. Some companies have floors (minimum severance regardless of tenure) and ceilings (maximum regardless of how long you've been there).
| Company Stage | Typical Severance | Additional Benefits | Negotiation Room |
|---|---|---|---|
| Startup (<50) | 2-4 weeks | COBRA coverage | High—everything negotiable |
| Growth (50-500) | 4-8 weeks | Extended vesting, references | Medium—some precedent |
| Enterprise (500+) | 8-16 weeks | Outplacement, extended benefits | Low—standard packages |
| FAANG | 12-26 weeks | Full benefits continuation | Very low—take it or leave it |
| PE-backed | 2-4 weeks | Often minimal | Medium—depends on deal terms |
Health benefits continuation determines whether you can keep your health insurance and at what cost. COBRA allows you to continue your employer's health plan after departure, but you pay the full cost—often $1,500-$2,000 per month for family coverage. Many severance packages include a COBRA subsidy where the company pays some or all of that cost for a defined period.
Equity treatment is often overlooked but can be the most valuable component. If you have unvested stock options or RSUs, the default is that you forfeit them when you leave. But severance agreements can include accelerated vesting (some portion vests immediately) or extended exercise windows (more time to decide whether to exercise your vested options).
For engineers at startups with meaningful equity, the equity component can dwarf the cash severance. I've seen cases where engineers negotiated six months of accelerated vesting—worth $50,000 or more—while barely touching the cash component.
Bonus treatment varies. Some companies pay pro-rated bonuses for the portion of the year worked. Others treat termination as forfeiting any bonus. This is often negotiable.
Outplacement services are sometimes offered—career coaching, resume help, job search support. These services have value, though it varies. If the company offers outplacement, you can sometimes negotiate to receive equivalent cash instead if you don't want the services.
Reference terms matter more than people realize. A clear commitment to provide positive references, ideally from specific people you name, has real value for your job search.
Non-disparagement clauses typically prevent both parties from speaking negatively about each other. Ensure these are mutual—you shouldn't agree not to disparage the company if they're free to disparage you.
What To Expect By Company Type
Severance varies dramatically by company stage and financial position.
At early-stage startups with limited runway, don't expect much. Many pre-Series A companies have minimal or no severance policies, and their cash constraints are real. Two weeks to a month is common if they offer anything at all.
At growth-stage startups with funding, policies are more established. You might see four to eight weeks plus some COBRA subsidy. Equity treatment becomes more relevant here since the equity may have meaningful value.
At late-stage startups and public companies, severance policies are typically documented and more generous. Eight to sixteen weeks is common, with full COBRA coverage matching the cash period. These companies have HR infrastructure and have thought through severance as part of their employment practices.
At Big Tech companies, severance is often generous because these companies can afford it and because their reputations matter. Expect well-defined policies with meaningful minimums. Google, Meta, and similar companies have provided severance packages of four to six months plus extended healthcare in recent layoff rounds.
The financial health of the company matters too. A profitable company can afford to be generous; a company laying people off because they're running out of money may genuinely not have resources for significant severance.
How To Negotiate
First, understand that you have more leverage than you think. The company wants this to be over cleanly. They want you to sign the release and move on. Every day you don't sign is a day they're not protected from potential legal claims. They want you to feel fairly treated so you don't badmouth them to former colleagues or on Glassdoor.
Second, understand that the first offer is almost never the best offer. Companies build in negotiating room. They expect some people to push back. The initial offer is calibrated to seem reasonable while leaving room for improvement.
Start by thanking them for the offer and indicating you need time to review it. Most severance agreements give you at least 21 days to consider (and they're legally required to give 45 days in some circumstances). Don't feel pressured to decide immediately.
Then evaluate each component. Which elements matter most to you? If you have significant unvested equity, that might be your priority. If healthcare is critical—a family member with ongoing medical needs, for example—extended benefits might be worth more than additional cash.
When you respond, be professional but direct. "Thank you for this offer. Given my contributions over three years and the transition work I'll need to complete, I was hoping for something closer to twelve weeks. Would that be possible?" You're not threatening; you're negotiating.
If they push back on cash, try other components. "If the cash severance is fixed, would you consider extending the exercise window for my vested options from 90 days to two years?" This costs them nothing in immediate cash but has significant value to you.
Common elements that are often negotiable include additional severance weeks, extended benefits coverage, extended exercise windows for options, accelerated vesting for a portion of unvested equity, pro-rated bonus, specific reference commitments, and outplacement services (or cash equivalent).
One tactical note: if they offer outplacement services, you can often negotiate to receive that value as cash instead. Outplacement typically costs companies $3,000-$10,000. If you don't want the services, ask for a signing bonus instead.
When To Involve a Lawyer
Not every severance situation needs a lawyer, but some definitely do.
You probably don't need a lawyer if the layoff is straightforward (reduction in force, no performance issues), the severance is modest (small package means small potential upside), and you have no discrimination or retaliation concerns.
You probably should consult a lawyer if you have potential legal claims (discrimination, retaliation, wrongful termination), significant equity is at stake, the package is substantial and complex, you're being asked to sign broad releases you don't fully understand, or there's a non-compete that could affect your ability to work.
Employment lawyers typically charge $300-$600 per hour. For a simple review of a severance agreement, expect $500-$2,000. If they negotiate on your behalf, potentially $2,000-$5,000 or more. For significant packages or potential litigation, the investment often pays for itself many times over.
The best time to get legal advice is before you sign anything. Once you've signed the release, your leverage is gone.
Special Situations
Performance management situations require careful handling. If you're being managed out through a PIP, you may have more leverage than you think—especially if the PIP feels pretextual (retaliation, discrimination, or just an excuse to reduce headcount). Document everything, consider legal consultation, and recognize that negotiating an exit with severance may be better than fighting a losing battle and being terminated for cause with nothing.
Acquisition situations involve specific equity implications. If you have double-trigger acceleration in your equity agreement and you're terminated after an acquisition, that acceleration triggers. Make sure you understand your equity documents before negotiating severance—the equity component may be more valuable than the company realizes.
Mutual separation is different from layoff. If the company wants you to leave and you're willing to go, you're negotiating a deal that works for both sides. These situations often yield better severance because both parties benefit from a clean separation.
Resignation typically means no severance, but there are exceptions. If the company wants you gone and is making your life difficult to encourage resignation, you might negotiate a separation agreement. "If you'd like me to leave, I'm open to discussing terms" is a reasonable conversation to have.
Protecting Yourself
Before you sign anything, understand what you're giving up. The release language in severance agreements is often broad—you're waiving the right to sue for anything related to your employment, including things you might not be aware of yet.
Read the agreement carefully. If there's language you don't understand, ask for clarification or consult a lawyer. Pay particular attention to non-compete clauses (which may limit your next job), non-solicitation clauses (which may prevent you from recruiting former colleagues), confidentiality requirements (what can and can't you discuss), and the scope of the release (what claims you're giving up).
If anything seems unreasonable, negotiate it. Companies often include aggressive language in their standard agreements because most people don't push back. Non-disparagement should be mutual. Non-competes should be limited and enforceable. The release should be reasonable in scope.
The engineer who received two weeks after three years? He pushed back, professionally but firmly. He cited his tenure, his contributions, and the transition knowledge he held. He asked about colleagues in similar situations—and learned that others had received more. He requested extended healthcare for his family.
The final package: eight weeks of severance, three months of COBRA subsidy, and a written commitment to positive references from his manager and director. Not life-changing, but $15,000 better than the original offer—money that made a real difference during his job search.
Severance is a negotiation. The first offer is the opening bid, not the final answer. Know what you're worth, know what you're signing, and don't leave money on the table when you need it most.
References
[^1]: SmithSpektrum severance negotiation advisory, 150+ cases, 2020-2026. [^2]: SHRM, "Severance Practice Survey," 2025. [^3]: Glassdoor, "Severance Pay Guide," 2024. [^4]: NELA (National Employment Law Association), severance guidance.
Navigating a severance situation? Contact SmithSpektrum for confidential guidance.
Author: Irvan Smith, Founder & Managing Director at SmithSpektrum