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January 16, 2002
Workers Seeking Severance Deals at Hiring
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Reacting to the unstable economy, more would-be employees are negotiating severance packages as a condition for accepting job offers, according to USA Today.

The rise in job cuts, higher turnover at the CEO level, and merger mania have left applicants convinced that they need to insulate themselves.

"They're saying, 'I'm assuming risk, uprooting my life, and for that, I need assurances,'" says Brian Stern at consulting firm SHL in Cleveland. "They realize they're not going to work for that company for life."

Hence, severance is joining salary, benefits, and vacation as a key component of the job negotiation process. More than 60% of job seekers agree it's important to negotiate severance agreements up front, according to a study cited by USA Today. Fully 40 percent research severance and outplacement policies even before beginning employment talks with a company.

Another reason for the trend is the growing use of the non-compete clause. Because more companies are requiring laid-off workers to abide by legal agreements that restrict them from joining a competitor, job seekers want severance deals as a cushion for those situations.

One study of American and Canadian companies found that roughly half require some former employees to sign non-compete provisions as a condition of receiving severance benefits.

And when it comes to severance, it's not just money, according to the newspaper. Increasingly, everything from outplacement assistance to life insurance and health benefit extensions are being discussed up front.

Far from dissuading potential employers, the practice shows job seekers are savvy about the current employment climate, benefit experts tell USA Today.

Those most likely to negotiate still include executives, but the practice is spreading down through the ranks. Large multinational firms tend to be more likely to grant agreements before a hire is finalized, the newspaper reports.

"There's more acceptance," says Seth Harris, a managing director in the Burlington, Mass., office of executive-recruiting firm Christian & Timbers. "It used to be that a person who brought it up was seen as risk averse. It was in bad form, but now it's taken in stride."

Companies are not legally required to provide any severance. That's underlined by another study showing that cash payments to employees laid off last year declined by as much as 20 percent from 1997.


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