Can you negotiate severance if you're laid off? It's possible - and it's the 'No. 1 thing' most workers leave on the table.

By Hannah Erin Lang

Elon Musk apologized for 'incorrectly low' severance packages in the latest Tesla layoffs. Here's one way to protect yourself from future job cuts.

In some ways, the match between a company and a job candidate resembles marriage: You court. You plan a future together. If all goes well, you make things official and sign on the dotted line.

But in marriage as in the job market, it's best to have something in writing just in case things go south.

You can prepare for a potential layoff from your job the same way you might anticipate a possible divorce, career coaches and employment lawyers told MarketWatch. And the best time to negotiate a severance package is likely the time you're thinking about it the least: when you get a new job offer.

"It's like a prenup," said Tessa White, a career adviser and founder of the Job Doctor. "When they love you is the right time to negotiate."

In fact, a better severance package is the "No. 1 thing" that most new employees are leaving on the table in offer-letter negotiations, White said.

"I've never had a client get turned down on that request," she said. "And very, very few people ask for it."

Despite an overall strong labor market, several large companies have announced sweeping layoffs this year.

On Monday, Tesla (TSLA) sent an email to employees announcing the company would slash 10% of its workforce. Details about the laid off workers' severance packages weren't released, but Tesla CEO Elon Musk reportedly said in an internal email that some severance packages were "incorrectly low" and he apologized for the mistake.

Google (GOOGL) also announced a new round of layoffs Wednesday. The company also said it would move some roles overseas.

At a time when job hopping can feel extra risky, negotiating a severance package ahead of time can give workers a bit more peace of mind, White said.

Related: Tesla to lay off 14% of its Buffalo, N.Y., workforce as part of large-scale job cuts

"I just think it's so easy to say to a new employer, 'I'm coming from something certain, a job that I love where I'm doing well, to come and join a company that could have risks that I can't see yet.'" White said. "'I'm not asking you to pay me if I don't do the job. ... I'm asking you to pay me in the event something unanticipated happens with the company, so that I can land on my feet."

Should you negotiate a severance package up front?

Accepting a new job may feel like an odd time to plan for the worst-case scenario, but it's the wisest time to consider how things could play out if you and a new company part ways, said Cody Yorke, a partner at the employment-law firm Outten & Golden.

Employees with high-ranking jobs or unique skill sets should drive a hard bargain up front on the terms of a termination, she said.

"If somebody is more senior, if they have particular knowledge or are specially qualified, they have more leverage in that negotiation and can use that on their way into the job," Yorke said.

Read more: 'There's no such thing as a good layoff': Why the firing process is so problematic

These kinds of workers are also frequently required to sign noncompete agreements prior to accepting a new role, she said.

A typical noncompete prohibits an employee from working for a competitor of the company for a period of up to two years. If you're signing that kind of contract, "that should be mirrored by a severance entitlement," Yorke said.

"When I'm negotiating agreements on the way in, I'm a bit of a pessimist. I'm always asking, 'What will happen if this goes badly?'" she said. Employees want to avoid ending up stuck in a noncompete with no job and not enough severance to help support them through that period, she said.

Workers should also look out for other forms of compensation that might be at risk in a potential layoff or "termination without cause," meaning a situation in which an employee is let go absent any serious misconduct, Yorke said. Those could include other terms and conditions like clawbacks of sign-on bonuses if you leave the company within a year or two.

Even workers well below the executive level can negotiate potential severance, White said, the same way they would their salary when taking a new job.

"I would say at about [an annual salary of] $75,000 or above, it's not a hard ask," White said. "You're not asking the company to pay in the event that you're fired for performance; you're asking for severance in the event that something unexpected happens."

Can you negotiate severance after you've already been laid off?

What about negotiating your severance package after the fact, when your company has already decided to lay you off? It's still possible, experts said - though likely much more challenging.

If you're looking to negotiate higher severance pay, it's important to note that in the majority of cases, companies have no legal obligation to offer you severance at all, said Edgar Ndjatou, the executive director of the employee-rights nonprofit Workplace Fairness.

"Not everyone gets severance [pay]," he said. "You can certainly try to negotiate it, and I've seen people make an attempt. Sometimes you're successful; a lot of times you're not."

Though the odds of negotiating more favorable severance terms may be steeper, other experts said it could be worth a shot.

"I don't think people should necessarily assume they have no ability," Yorke said. "It's not unheard of."

Employees who are let go often have one small piece of leverage, she noted: Most companies parting ways with a worker are keen to get that person's signature on a release-of-claims document - essentially, an agreement that they won't sue the company.

Others have noted that laid-off employees have little to lose in asking for more generous severance.

"The important part is that HR has a job, which is to get you to sign [a release of claims or other documents]," Ethan Evans, a former Amazon vice president now working as an executive coach, wrote in a post on his LinkedIn page. "If you ask for more, you can probably get more. If you give them a plausible reason to give you more, you can likely raise the offer."

That argument could include the fact that you relocated for the job, that you have a work-based visa, or "basically anything that makes them feel like bad people for having fired you," he wrote.

"You see, a severance package is blood money. It is a cash apology for screwing you over. It is a way for both the people and the company to tell themselves that they 'did right' by you," he wrote. "So if you can up their sense of guilt, the sense that you in particular were harmed and vulnerable, they will generally up the offer."

Evans didn't respond to a request for comment from MarketWatch.

What if you lose your job in a mass layoff?

Your chances of success in a severance negotiation also depend on the context of the job cut.

When it comes to broad corporate restructurings or mass reductions of force - say, a company cutting 10% of its workforce or eliminating thousands of jobs in one fell swoop - many of those terms have been predetermined, and there may be little wiggle room for affected employees, experts said.

"If they're getting rid of a ton of people, they don't want to have 1,000 conversations," said Paolo Gallo, an executive career coach and the author of "The Seven Games of Leadership: Navigating the Inner Journey of Leaders."

One key exception? You may have more power to negotiate if you've got what looks like potential grounds for a legal complaint - for example, if you think you were targeted for cuts because of your age, sex, religion, race or other protected class.

But that can be difficult to prove in the instance of mass cuts, experts said, and you'll bear the burden of proof if you take your former employer to court.

Employees might also have more flexibility in the case of a more targeted reduction in force, Yorke said, like the reconfiguration of a specific team or a change in senior leadership.

And even if you can't win higher severance pay, you haven't lost all your leverage, Gallo said. A layoff can provide an opportunity to sharpen or develop new professional skills and put yourself in a stronger negotiating position in the next steps of your career.

"While it is true that you may be in a difficult spot, this eventually happens to everybody," he said. "Maybe this is a moment where you can take stock of what you're very good at ... and reinvest in yourself."

Have you been affected by layoffs? If you'd like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.

Read next: 3 ways to prep for a tougher job market: 'A lot of doors are closing.'

-Hannah Erin Lang

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04-18-24 1028ET

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