A golden handshake is a severance package offered to senior executives and high-ranking employees to protect against sudden termination. It may include a lump sum of money, stock options, insurance coverage, and payouts into retirement accounts. It can also be used as a retirement sweetener or a punishment. It is important to read the terms carefully and clarify questionable terms.
A golden handshake is a hefty severance package that is offered to senior executives and other high-ranking employees. Often, the terms of a golden handshake are included in an employment contract and are considered insurance against sudden or involuntary termination of work. A golden handshake may also be offered to an employee to encourage them to retire; this is common in systems such as schools, where long-term employees make the most money and it can be cheaper to hire entry-level teachers.
The characteristics of a golden handshake vary by location. It typically includes a lump sum of money and may also include stock or securities options, continued insurance coverage, or payouts into retirement accounts. A golden handshake also typically includes a few weeks of full pay, especially if the termination was abrupt, allowing the former employee to catch up.
Corporate executives are particularly susceptible to loyalty shifts and corporate restructuring. As a result, many require gold handshake contracts to ensure they are offset if their positions suddenly evaporate or change dramatically. Executives can also be made obsolete through departmental reorganization, or they can be fired for poor performance or other problems with the company. Most executives are aware that their job security is very low, especially if they have been raised to positions of high authority.
Golden handshakes can also be retirement sweeteners. In industries where retirement of long-term employees is an economic decision, a golden handshake is almost used as a punishment. If the employee refuses to withdraw, the offer will be withdrawn and the employee could suffer a loss. Employees may also be required to retire due to declining job performance or age, in which case a company may wish to provide recognition of the employee’s years of loyal service.
In a case where a golden handshake is part of an employment contract, it pays to read the terms carefully and clarify questionable terms. Employees may want to ask whether golden handshakes will still be offered if companies liquidate or go bankrupt, for example. It is also important to ask about the conditions under which the severance package will not be offered. If you’re offered a golden handshake to persuade you to back out, read the offer carefully and don’t be afraid to haggle; you may be able to get a better deal by being forward about your wishes.
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