How to Negotiate an Employment Contract

What to Ask For
How the precise terms of your employment agreement take shape depends upon the hiring company's financial resources, the value you bring to the table as well as what's standard for the company, industry and position for which the company is hiring.

To determine what you can reasonably ask for, CPS Energy's Barron advises IT executives to consider the unique strengths they offer to the company courting them and the risk they're assuming in taking a new job. For example, if a company is aggressively wooing you, if you'd have to leave a stable job where you're well-respected, if you'd have to relocate, if you're being asked to lead a complicated, high-profile project such as an infrastructure upgrade, or any combination of those circumstances, then you're well positioned to negotiate a cushy contract.

Even if you're not a celebrity in your field, all IT executives should be sure to get the amount of their bonus and the criteria by which it will be awarded in writing, says Sam Gordon, director of executive search firm Harvey Nash's CIO practice. "Quite often, executives won't be eligible for a bonus if they're not employed on the day bonuses are paid," he says. So if you get fired two days before bonuses are due, you're not entitled to your bonus unless your offer letter states otherwise, he adds.

Similarly, if you leave one employer in the middle of the year to take a new job and are thus forgoing a bonus with the company you're leaving, you can ask your new employer to cover the monies you're walking away from by giving you a sign-on bonus or a generous relocation package, says recruiter Vell. "The more money you are leaving behind, the better case you have," she adds.

Harvey Nash's Gordon also recommends getting the notice period in writing—that is, the amount of time you need to give your employer before you leave and the amount of time it needs to give you if it decides to replace you.

Mark Polansky, the managing director of Korn/Ferry International's North American information technology practice, says two to four weeks' notice is common in American companies. In Europe, three- to six-month notice periods are the norm for senior roles, according to Gordon, who has recruited CIOs for European companies.

In addition to bonuses and notice periods, CPS Energy's Barron advises IT executives to make sure they define what will happen in the event they and their employers need to part ways, and how such a situation will be treated. That means establishing the reasons why an employee may be terminated (also known as establishing "cause" or "cause for termination"). Cause may include failure to perform one's duties, lying, stealing from the company, divulging trade secrets, or some other behavior that reflects poorly on or materially damages the company.

Attorney Egan notes that employers will often state in an employment agreement that if an employee is fired for cause, the employee gets nothing. Then, if the company decides it no longer wants or needs the employee's services, Egan says the employer will say it's terminating the worker for cause in an attempt to relieve itself of its obligation to pay the employee severance. To prevent such a situation from occurring, employees should ensure that "cause" and the circumstances for which they can be terminated without severance are abundantly clear in the employment agreement.

Barron also advises IT executives to make sure they lay out the severance package they'll receive in the event they leave, are laid off due to a change in control, or the company decides it just doesn't need them any longer, as well as how their departure from the company will be communicated internally and externally. When Barron resigned from his managing director post, he left his employer on good terms because he had negotiated a diplomatic parting of ways in his employment contract. "The company agreed to specific language to communicate to the workforce and vendors why I left, that I had left in good standing, that there were no issues and that we decided to amicably part ways," he says. His former employer also agreed to give him a good reference: "If someone called to check my employment, I wanted to get credit for the good work I did and not just, 'This person worked here for this amount of time,' " he says.

A year's worth of severance is standard for most CIOs, according to Banerji. He recommends IT executives ask for a year's salary and benefits (or related coverage, such as Cobra health insurance). According to Banerji, two years' worth of severance is a "very good" package. Anything beyond that is exceptional; anything less than six months is sub-standard, and should make a candidate wonder what a prospective employer is trying to put past him, he adds. (To see a generic severance program, see Sample Executive Severance Agreement.)

Beyond the basics of bonus, notice period, cause for termination and severance that all IT executives should set out in an employment agreement, there are a number of other protections you can request:

• If you're leaving a company a year or six months before your benefits have fully vested, you can ask the employer hiring you to compensate you for the benefits you're walking away from.
• You can negotiate the number of stock options you get, but unless you're a CEO, generally not the manner in which they're granted or the terms of vesting, says Vell.
• Banerji recommends that IT executives request a change-of-control agreement that triggers full vesting or accelerated vesting of at least a portion of their equity, especially in the event their company is sold. He notes that one cannot expect full or accelerated vesting if one is being terminated for cause or poor performance.
• If the company with which you're negotiating refuses to budge on salary or bonus, you can have the firm pay for you to move if you have to relocate for the job. DSC Logistics' Goluska says that if he were leaving a metropolitan area to work for a company based in a small community with few job opportunities, he would also want the company to commit in an employment agreement to relocating him back to his previous home in the event the company laid him off.
• If you can't get your new employer to pay for your move, you might be able to get it to float you a loan to cover your moving expenses and to forgive a certain amount of money each year (say, $25,000 for a $100,000 loan), though public and private companies are shying away from this, says Vell.

The more terms you bring to the table, the more likely you are to get the agreement you want because your employer will have options. "Realize that a company can do anything it wants to. The first time you hear a 'No' doesn't mean you can't get an employment contract," says Barron.

If you're getting all these concessions, what must you give up?

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