As every good Boy Scout knows, it is important to be prepared. This motto carries over from fire building and water safety into the corporate world, particularly when so many companies are closing offices and cutting jobs.
By law, a company is required to help prepare its employees once layoffs occur by offering severance based on length of service and age, but this, according to Toronto-based financial planner Peter Merrick, is not always enough.
“Under the Employment Standards Act, employers are required to give employees a minimum of two weeks of severance per year of service, however, this is often negotiable and most people don’t realize it,” Merrick said. “It’s like buying a house – I might give you an offer, but it’s not my final offer.”
Norman Grosman, managing partner of Toronto’s Grosman, Grosman and Gale, which specializes in providing legal advice in employment and labour law issues in the province of Ontario, agrees that negotiation is possible, but cautions against acting too hastily.
“Many aspects of severance packages are open to discussion and negotiation, so one should never be forced to or feel obliged to agree to anything or sign anything on the spot. Take some time – and most organizations will give some time to consider whatever they’re proposing – get some perspective and seek some advice,” he suggested.
Grosman went on to encourage seeking out the right sort of advice. “There’s all kinds of advice available out there, including advice from well intentioned neighbour who might do nothing but get you excited and agitated about what your employer’s trying to do. Take the time and do a little research to make sure that the advice that you’re getting is from someone who knows what they’re talking about.”
When Ottawa-based Scott Volk got his pink-slip from Nortel in November, he was satisfied with what was offered as a severance package, and while he did not officially seek advice to ensure that the deal was fair, he did discuss the matter with his co-workers.
“There was a whole wealth of knowledge amongst people at Nortel who had been laid off. The people who had considered the advice of a lawyer or a financial consultant piped the information back into the community, so we pretty much knew that if we worked there under five years, not to bother trying to negotiate,” Volk said.
Where Volk’s experience with his severance package was clear cut and satisfactory, there are countless stories of employees who have been short-changed in their severance package. This is where advice and negotiation are key.
“During the dot-com boom, people were stolen from secure jobs to work at start-ups,” Merrick said. They would work for the new company for a year at sky-high salaries and then get laid off with a month’s worth of severance, he continued. For people in these cases, the new company can actually be required to provide severance for the number of years that the person worked at the previous, secure job.
Another scenario where a company can be accountable for further severance is in the case of what’s called a constructive dismissal.
“If I took a position knowing that I was hired to do a certain job, and this company takes away a lot of the things that I was promised causing me to quit because it wasn’t what I was hired for, this is constructive dismissal. The company has to provide severance,” Merrick said. “These are things that people just don’t know.”
He suggested that before even starting a job, a severance plan should be worked out between the employer and employee.
“Make it like a pre-nuptial agreement. Ask up front ‘what are you going to give me if things don’t work out?’ If they want you, they’ll give it to you,” he said.
Money isn’t always the only term to negotiate within a severance package.
“It’s not unheard of for employers to contribute to upgrading an individual’s skills as a part of a severance package,” Grosman said. He also noted that some companies include work-related items such as an employee’s company laptop computer in with the severance. For Volk, Nortel included transition counselling.
“I took advantage of it,” he said. “It helped with so many things from getting a r