What Not to Do When Negotiating Severance or Separation Compensation

Negotiating Severance
Image Credit: Pexels / gratisography.com

Let’s learn how not to negotiate severance or separation compensation when it’s time to leave a job by examining a classic sketch by legendary comedians Abbott and Costello. Who knew they were career coaches, too?

We can all make the case that we’re underpaid and underappreciated, right? Or, at least, one of the two.

Negotiating salary, benefits and other terms of a new gig requires preparation, thought, energy and tact. But ever thought about negotiating the exit from your current gig? Even if you’re being laid off and don’t control the timeframe of your exit, you may still be able to negotiate extended benefits, additional severance pay or other terms of your departure.

Rarely is an employee who has resigned or been terminated handed a check as they walk out the door. Instead, employees who are leaving employment should carefully consider how to approach their employer about their severance package or separation compensation.

Let’s use an example pulled out of a time capsule: Abbott and Costello, a famous comedy team from the ‘40s and ‘50s, had a routine called “Dollar A Day”. The sketch is about Costello quitting the job Abbott hired him for, and Costello is looking to be paid what is owed to him. You can find the script here and can listen to the sketch here.

The plot is simple. Costello works for Abbott until Costello decides to quit. But it all goes wrong for Costello as he is negotiating his separation pay. The conversation is a classic example of how not to approach exit negotiation with your soon-to-be former employer.

Lacking Preparedness

Lou Costello: I’m working for you, and you owe me a whole year’s salary!

Bud Abbott: Wait a minute …

Lou Costello: 365 days, 365 dollars, you owe me a dollar a day.

Bud Abbott: Wait a minute, let’s straighten this out.

Lou Costello: Pay me up!

Make sure to hold on to any documentation confirming compensation terms with your employer, like a contract you signed when you started. That way, you can be sure those terms are enforced when you’re leaving your job. In the sketch, Costello makes assumptions about what he’s owed; if he had a contract as evidence of an agreement, he’d be in a much better position.

Costello’s demeanor isn’t doing him any favors, either. Making emotional demands when negotiating only works in the movies. In real life, making demands – loudly – is a surefire way to shut down any kind of negotiation. A diplomatic, temperate approach is more likely to result in any proposal being considered.

Losing Focus

Bud Abbott: You say you worked 365 days for me, and you want to be reimbursed.

Lou Costello: Look, I don’t want to burst anything! Just give me my money, 365 bucks, I’ll get out.

Bud Abbott: Okay, look, now don’t get excited, take it easy. Now, listen. How many hours a day did you work?

Lou Costello: Eight hours a day.

Bud Abbott: And how many hours are there in a day?

Lou Costello: Look, now Abbott, don’t try to put anything over on me. There are 24 hours in a day, all but February, which has 28.

Bud Abbott: You’re absolutely right, there are 24 hours in a day. But by working eight hours you only really worked one-third of each day, isn’t that right?

Lou Costello: That’s according to the way you figure it.

First mistake here: Costello isn’t thinking beyond the money he’s owed. If you’re only considering cash as the issue, you’re already devaluing yourself and leaving money on the table (Whew! Got that cliché out of the way).

Costello’s “Just give me my money…” line is all too familiar. As soon as money is mentioned, we tend to forget about other aspects of negotiation. That’s true whether negotiating a contract at a new job or negotiating a severance package; the jingle of cash is loud enough to drown out other issues and concerns. But as mentioned above, there’s much more you can negotiate when you’re leaving a job, including benefits, or even a letter of recommendation.

Additionally, when Abbott entangles Costello in a debate about hours worked, Costello mixes days with hours and allows Abbott to reason eight hours is only “…one-third of each (work) day.” Costello lost $244 dollars because didn’t stay focused on what he wanted out of the negotiation: money.

Conceding Important – and Debatable – Details

Bud Abbott: Well, one-third of 365 is about $121. So you only actually have $121 coming to you. That’s the way I reckon it

Lou Costello: You sure are wreckin’ it! Come on, give it up! Give me the dough!

Bud Abbott: Well, you did have 121 dollars coming, but …

Lou Costello: I knew there was a “but” in it.

Bud Abbott: But you didn’t work Sundays, did you?

Lou Costello: No, I had to take a day off to wash my lingerie!

Bud Abbott: All right, there are 52 Sundays in a year, deduct 52 from $121 which leaves $69 coming to you.

Lou Costello: You’re sure of that?

Bud Abbott: Positive!

Lou Costello: You see, I don’t want you to cheat yourself.

Bud Abbott: Now, that’s mighty nice of you, to look out for my interests.

Costello has now agreed that he worked for less than a dollar a day, ignoring the fact that a “Dollar a Day” seemed to be the initial agreement he made with Abbott. To get something – anything – out of the negotiation, Costello has given up on his initial argument and is now willing to accept whatever is being offered.

Beyond that, Costello seems to neglect the fact that while coming to work has value – a “Dollar a Day”, for example – equity comes from performance, not merely showing up. Costello is telling Abbott that he worked hard every day, but Abbott clearly undervalues Costello’s on-the-job performance.

Giving Up

Bud Abbott: All right, I’ll be glad to give you the $69, but …

Lou Costello: Hold on to your hats, here we go again! Look, Abbott, give me a couple of dollars. How’s that?

Bud Abbott: Well, you must admit you only worked a half a day on Saturday, isn’t that right, partner?

Lou Costello: Partner! Now that I’m losing money, I’m a partner! Look, will you give me a dollar? I’ll settle … give me a half a buck.

Bud Abbott: Now wait a minute! Wait a minute, just a second. Just a minute, now where was I?

Lou Costello: You just had a toehold on my $69.

Bud Abbott: Oh yes, yes. A half a day on Saturdays, 52 Saturdays in a year, one half of 52 is 26, so you will deduct 26 from 69, leaving you the sum of $43.

Costello’s lack of preparation is frustrating. Because of his ignorance of the terms of his employment, he’s letting himself be taken advantage of by his employer. At this point, he might be better served to walk away from negotiation and find himself a lawyer. When people are unprepared for informed negotiation, they can become easily frustrated and defeated, and they wind up taking whatever they can get, just like Costello: “Look, will you give me a dollar?”

Letting Emotion Guide Your Negotiation

Lou Costello: Sum of?

Bud Abbott: Yes, sum of.

Lou Costello: If I get some of it, I’ll be lucky! Look, Abbott, give me a quarter, will you let me have a quarter? Give me 20 cents.

Bud Abbott: Well, now wait a minute.

Lou Costello: I’m going out of here with something!

When you allow your emotions to guide your argument, the other party knows you’re less likely to be logical or stick to your original position. In this case, Costello blew his cover early on when he said, “Pay me up!”

With that phrase, Costello’s employer know he’s made an emotional decision to quit. And because he knows Costello is emotional, Abbott is able to protect his business interests – by saving money – and talk Costello down from his initial demand of a “Dollar A Day” to virtually nothing.

By making an emotional decision, striking a demanding tone, neglecting to prepare, losing focus, and conceding important – though debatable – points, Costello was unable to effectively negotiate, eventually giving up and succumbing to desperation: “Look, Abbott, give me a quarter, will you let me have a quarter?”

To be clear, depending on the terms of your employment and the terms of your departure, you can negotiate severance at the end of your employment. If you’re planning to leave your job and know you’ll be able to negotiate the terms of your exit, make sure you’re prepared to have a logical, civil, focused conversation with your employer about your separation compensation.

Don’t fly off the handle like Costello; If you let your emotions take over and make a snap decision, and then attempt to negotiate your severance or exit package without properly preparing, you’re almost certain to end up with less than you wanted… though, hopefully, not a single dollar.


Have you successfully negotiated an exit package at a past job? We want to hear from you! Leave a comment or join the discussion on Twitter.