CBS CEO Les Moonves resigned on Sept. 9 after numerous sexual harassment allegations. Despite these serious charges, he may leave the network with a $120 million severance package. It is reported that CBS will donate $20 million of his financial settlement to organizations that support the #MeToo movement. His departure also provides important lessons about the importance of severance agreements.
Before his departure, he received a $24 million annual salary. His salary package contained a salary and bonus of $184 million. He was also entitled to stocks and a pension worth $1 million if he did not leave his position for cause.
Unless there is an enforceable agreement, however, there is no guarantee that a terminated employee will receive severance payments. Typically, executives receive severance pay equal to a month’s salary for each year worked by the employee. Other employees usually receive a week’s salary for every year with that employer.
An employee should ask how their soon-to-be former employer will answer reference checks or requests for recommendations. A severance agreement should reflect any strong worker performance. If a company is undergoing major changes, an employee should obtain letters of recommendations from supervisors and network with colleagues on LinkedIn and other professional networking sites.
There may be tax consequences for any money received under these agreements or packages. A lump sum payment may have large income tax implications and, like a typical paycheck, deductions for Social Security, Medicare and payroll taxes like a typical paycheck. Installment payments may be better.
Remember that there are other valuable items, besides money, when negotiating a severance agreement. These include health benefits, outplacement and career services, stock options, tuition forgiveness and keeping company property, such as personal electronic devices, vehicles or computers.
Finally, employees over 40 years old have 21 days to consider a severance package. This period is 45 days for workers in a group termination. An attorney can help review a severance package offer and help negotiation employee contracts.