Introduction
It is common in the corporate world for managers or executives to leave their employment through a negotiated exit. In such circumstances the executive ought to negotiate well and be sure when to accept or keep pushing. In this article I give some advice on how to negotiate.
Termination of employment through negotiation
There are many factors that may lead to termination of employment through negotiation. Some of them include the following:
- Restructuring or re-organisation by the company.
- A company preferring amicable settlement instead dismissing the executive.
- An executive seeing an opportunity to negotiate and leave instead of resigning or fighting.
Factors to consider when negotiating an exit package
There is no one correct way of doing it. It is all situational. Some of the considerations are explained below.
Contract position
Check your contract of employment if it provides for negotiation of an exit package. Some contracts may have some formula or minimum packages yet others are silent.
Company position
In the event of restructuring or retrenchment the company may have a template on computing terminal benefits. Make sure you understand it. Use the template to carry out some computations before engaging the employer to push for more.
The company may have set a precedent or standard when it separated with some executives in the past. It is important to have an idea of what was paid or how the exit package was computed.
Position at law
In the case of retrenchment there are usually minimum packages, currently one month’s salary for every year served. The other position at law may be according to your contract of employment with the employer.
Negotiating power
Where the employer is negotiating with the employee to leave, such an executive may have better negotiating power though there are no guarantees. On the other hand if it is the employee who wants to leave the employer may not be pleased. The executive may even be asked to resign if he wants to leave.
Relationship with decision makers
Negotiations are easier when the executive has good relations with the decision makers such as the Human Resource Manager or Director, Chief Finance Officer, Chief Executive Officer or the Board of Directors particularly the Chairperson.
Consider your personal circumstances
Each person may have a peculiar situation at the time of negotiating. Try to negotiate as much as you can knowing very well that some of your demands or requests will not be accepted. They will be turned down. There is a saying which goes “ask for more to get less”.
Compile a checklist of issues to negotiate
It is advisable to compile a checklist of the things you want to negotiate to avoid going back and forth. It usually irritates decision makers if the executive keeps coming back especially to negotiate new things. Some of the issues may include the following:
- Severance or retrenchment package.
- Stabilisation allowance.
- Motor vehicle.
- Treatment of outstanding loans.
- Benefits such as medical aid, school fees.
Avoid resigning first and then trying to negotiate terminal benefits. At times it might be better to seek certain assurances before resigning.
Rank your priorities
It is rare to get all your demands or requests. Prioritise them. Target the more important ones. Be prepared to compromise if that does not seriously prejudice you. Employers are usually put off by demands or requests they consider to be out of greed or are unreasonable.
Consider your post-employment situation
Do not confine yourself to the current situation. Look into the future and consider that in your negotiations. If you are unable to find employment soon negotiate for that reality.
Direct versus represented negotiations
Decide whether you want to negotiate personally or you want your legal advisor to assist you. It all depends with your situation. Through personal or direct negotiations the executive may be able to make use of personal relations. Negotiation through a legal advisor may be faster, focussed and it may be possible to push for what is correct at law. A company may assign its lawyer to handle the negotiations so it may end up being lawyer to lawyer.
Tax implications
When negotiating consider both the gross and net exit package. It is advisable to consult a tax consultant before or during negotiations.
Conclusion
Depending with situations, at times it is possible to negotiate exit packages. Negotiation is a skill.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations) MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.
