How to Negotiate Severance: What to Ask For (2026)

Salary • By Hassan Raza • Published October 21, 2026 • Updated October 21, 2026

Knowing how to negotiate severance starts with one rule: don't rush. When a layoff comes with a severance agreement, the urge is to sign fast and put the whole thing behind you. Hold off. A severance agreement is a contract, often one where you give up legal rights in exchange for money. It's also one of the few moments in a layoff where you may have some leverage.

Before you negotiate, you need to know what you'd be signing away (the release of claims) and how much time the law gives you if you're 40 or older. After that come the practical pieces: what you can reasonably ask for, sample wording for your request, how severance is taxed, and how it can affect unemployment benefits. I've tied the rules to the Department of Labor, the EEOC and the IRS so you can check them.

Not legal or tax advice. Severance agreements vary, and state laws differ. For a complex agreement or a possible legal claim, talk with an employment attorney. For tax questions, talk with a tax professional.

If you've just been laid off, start with our checklist on what to do after a layoff for unemployment, health coverage and your 401(k), then come back here for the severance details.

Is Severance Required?

Generally, no. The Department of Labor says the Fair Labor Standards Act doesn't require severance pay. Severance is a matter of agreement between an employer and an employee (or the employee's representative, such as a union).

That said, you may be entitled to severance if it's promised in: - An employment contract or offer letter - An employer severance plan or policy - A union contract

DOL's severance pay page notes that its Employee Benefits Security Administration (EBSA) may be able to help if you didn't receive severance benefits promised under an employer-sponsored plan.

Separately, the federal WARN Act generally requires covered employers to give 60 days' notice of plant closings and mass layoffs. That's a notice rule, not a severance rule, but if you didn't get required notice, it may be relevant. Our layoff guide covers WARN basics.

What a Release of Claims Means

Most severance agreements are offered in exchange for a release: you agree not to sue the employer over claims related to your employment, such as discrimination or wrongful termination claims, in return for the severance package.

Go through the release line by line. Terms that show up a lot: - General release of known and unknown claims up to the signing date - Confidentiality about the agreement's terms - Non-disparagement (you agree not to say negative things about the company) - Non-compete or non-solicit clauses, whose enforceability varies by state - Return of company property and cooperation clauses - Repayment ("clawback") terms if you breach the agreement

What a release generally can't do: the EEOC says a severance agreement can't stop you from filing a discrimination charge with the EEOC or participating in an EEOC investigation, hearing or proceeding.

Review Periods: The Rules for Workers 40 and Older

If you're 40 or older and the release waives age discrimination claims under the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWBPA) sets minimum requirements. According to the EEOC and its regulations (29 CFR 1625.22):

• 21 days to consider an individual severance offer
• 45 days to consider if the offer is part of an exit incentive or other employment termination program offered to a group or class of employees (for example, a group layoff). In that case the employer must also give you written information about who was covered by the program and the ages of those selected and not selected.
• 7 days to revoke after you sign. This period can't be shortened, and the agreement doesn't take effect until it ends.
• The agreement must be written in plain language, specifically refer to the ADEA, and advise you in writing to consult an attorney.
• You must receive something of value beyond what you're already entitled to.

The EEOC's regulations say the 21- or 45-day clock runs from the employer's final offer, and material changes restart it, unless the parties agree otherwise. You may sign earlier if your decision is knowing and voluntary, but you don't have to.

If you're under 40, these specific federal periods don't apply, though your employer may still offer review time. Ask how long you have.

What You Can Ask For

You can't negotiate if you don't ask. Requests that are common and reasonable:

1. More weeks of pay. Many employers base severance on years of service. Ask whether there's flexibility, especially if you had a long tenure, specialized skills, or are being asked to sign a broad release.
2. Health coverage support. A COBRA premium subsidy for some months, or a lump sum to cover premiums. COBRA can be expensive because you may pay the full premium plus a 2% administrative fee.
3. Your bonus. A pro-rated share of an annual bonus you were on track to earn, or the full bonus if the performance period is nearly complete.
4. Equity. Accelerated vesting of RSUs or options that would vest soon, or an extended window to exercise vested stock options.
5. Your end date. A later separation date can matter for vesting, benefits eligibility or bonus timing.
6. References and wording. A neutral reference, an agreed description of your departure ("position eliminated"), or a mutual non-disparagement clause.
7. Outplacement services or career coaching.
8. Accrued PTO payout, if not already required by your state or company policy.
9. Equipment, such as keeping your laptop or phone (with company data removed).
10. Narrower restrictions, such as dropping or shortening a non-compete or non-solicit.

Prioritize. Narrow your list to the two or three items you care about most, and give a short reason for each.

How to Ask: Scripts and Email

On a Call

"Thank you for walking me through this. Before I sign, I'd like some time to review the agreement. I'd also like to ask whether there's flexibility on a few points, mainly the number of weeks and help with COBRA. Who should I send my questions to?"

Severance Negotiation Email

Subject: Questions on my separation agreement

Hi [Name],

Thank you for meeting with me and sending the separation agreement. I've reviewed it and appreciate the offer.

Given my [X] years with the company and [one sentence on key contributions], I'd like to ask whether the company would consider:

• Increasing severance from [X] to [Y] weeks
• Paying my COBRA premiums for [number] months
• Paying a pro-rated [year] bonus based on [period]

I'd also like to confirm the deadline to sign and when payments would begin.

Thank you for considering this. I'm happy to discuss.

Best, [Your name]

Polite and specific wins here. For other email patterns to borrow from, our salary negotiation email templates has more.

How Severance Is Taxed

According to IRS Publication 15 (2026), severance payments are wages subject to: - Federal income tax withholding - Social Security tax (6.2% up to the 2026 wage base of $184,500) - Medicare tax (1.45%, plus an additional 0.9% withheld on wages over $200,000 in a year)

Severance is generally treated as supplemental wages for federal withholding, so your employer may withhold federal income tax at a flat 22% (37% on supplemental wages over $1 million in a year) or combine it with regular wages under the aggregate method. Your actual tax is figured on your return based on your total income for the year. Our guide to how bonuses are taxed explains withholding vs. actual tax in more detail.

States with an income tax also withhold. California's Employment Development Department, for example, lists severance among the "other types" of supplemental wages eligible for its 6.6% optional flat withholding rate when they're paid separately from regular wages, in its current California Employer's Guide (DE 44, Rev. 52, 4-26).

Lump Sum vs. Salary Continuation

• Lump sum: paid at once, which can push more income into one tax year.
• Salary continuation: paid on your regular schedule, which spreads income and may keep benefits active longer, depending on the plan.

If your separation is late in the year, a lump sum paid in January instead of December falls into a different tax year. Ask whether timing is flexible, and check with a tax professional before deciding.

Severance and Unemployment Benefits

Whether severance affects unemployment insurance depends on your state. The Department of Labor explains that each state runs its own program and sets its own eligibility rules. Some states reduce or delay benefits while you receive severance, others don't, and the answer can depend on whether it's paid as a lump sum or as salary continuation.

What to do: - File promptly anyway. DOL advises contacting your state program as soon as possible after you become unemployed. - Report severance accurately when your state asks. - Use CareerOneStop's Unemployment Benefits Finder to reach your state's program and rules.

Also note that unemployment benefits are generally taxable income, according to the IRS. You can choose to have federal income tax withheld by filing Form W-4V, or you may need to make estimated tax payments.

When to Talk to an Employment Lawyer

It's worth paying for an attorney's review if: - You believe the layoff was discriminatory or retaliatory - You have significant equity, bonus or commission at stake - The agreement includes a broad non-compete or other restrictions - You're being asked to waive claims you already know about - You don't understand what you're signing

The EEOC notes that OWBPA requires agreements for workers 40 and older to advise them to consult an attorney, which is a good practice at any age. Consultation fees vary, so ask about them before you book.

Keep Going

Severance is one chapter of the money side of a job change, and our salary guides cover the others. Once the agreement is signed and you're ready for what's next, how to find a job in the U.S. can walk you through the search from your first application onward.

Frequently Asked Questions

Can I negotiate a severance package? Often, yes. Severance is a matter of agreement under federal law, so many terms can be discussed. Ask politely and focus on two or three priorities.

How long do I have to sign a severance agreement? If you're 40 or older and waiving age claims, federal rules require at least 21 days (45 days for group programs) plus a 7-day revocation period. Otherwise, it depends on the agreement. Ask for the deadline in writing.

Is severance pay taxed? Yes. The IRS treats severance as wages subject to federal income tax withholding, Social Security and Medicare.

Does severance affect unemployment? It depends on your state. File promptly and report severance as your state requires.

Can a severance agreement stop me from filing an EEOC charge? No. The EEOC says severance agreements can't prohibit you from filing a charge or participating in an EEOC investigation.

Sources

1. U.S. Department of Labor, "Severance Pay": https://www.dol.gov/general/topic/wages/severancepay
2. U.S. Equal Employment Opportunity Commission, "Q&A: Understanding Waivers of Discrimination Claims in Employee Severance Agreements": https://www.eeoc.gov/laws/guidance/qa-understanding-waivers-discrimination-claims-employee-severance-agreements
3. U.S. Equal Employment Opportunity Commission, "Manager Responsibilities – Waivers of Discrimination Complaints": https://www.eeoc.gov/employers/small-business/manager-responsibilities-waivers-discrimination-complaints
4. Electronic Code of Federal Regulations, 29 CFR 1625.22, "Waivers of rights and claims under the ADEA": https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XIV/part-1625/subpart-B/section-1625.22
5. Internal Revenue Service, Publication 15 (2026), Employer's Tax Guide: https://www.irs.gov/publications/p15
6. Internal Revenue Service, Topic No. 418, Unemployment compensation: https://www.irs.gov/taxtopics/tc418
7. U.S. Department of Labor, "How Do I File for Unemployment Insurance?": https://www.dol.gov/general/topic/unemployment-insurance
8. CareerOneStop (U.S. Department of Labor), "Unemployment Benefits Finder": https://www.careeronestop.org/LocalHelp/UnemploymentBenefits/find-unemployment-benefits.aspx
9. U.S. Department of Labor, EBSA, "A Worker's Guide to Health Benefits Under COBRA": https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra
10. California Employment Development Department, "California Employer's Guide" (DE 44, PDF): https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de44.pdf