What is a silver parachute?

A silver parachute is a compensation package paid to low level executives or senior managers if they are made redundant as a result of a merger or acquisition.

In certain circumstances an employee can also receive a silver parachute if they are fired. When applicable, silver parachutes appear as clauses within hiring contracts and are there to protect an employee.

A silver parachute is usually made up of severance pay, stock options and bonuses.

Where have you heard about silver parachutes?

You may have heard silver parachutes mentioned alongside golden parachutes or a “golden handshake”, which offer a higher level of compensation to top-tier executives. There’s also a tin parachute which can offer all employees below executive level a reduced compensation package.

There are several famous cases involving golden parachutes, most notably after the 2008 global financial crisis. Many of the high-level bank executives who failed to stop the bad practices that led to the crash were dismissed with large compensation packages which ran into the millions, while their employers had to ask the government to bail them out.

While silver parachutes don’t usually make the headlines in the same way, it stands to reason that where there are large golden parachutes, silver parachutes will also be in place.

What you need to know about silver parachutes.

Silver parachutes, and parachutes of any kind, aren’t commonplace so you’ll need to examine your employment contract carefully. They are intended to provide a "soft landing" for staff members who lose their jobs, primarily as a result of corporate restructuring.

To qualify for a silver parachute, you’ll need to be in an executive or senior management position, and meet certain conditions outlined in your contract. For example, you may only receive a silver parachute if your company undergoes a merger or acquisition and your role becomes redundant.

Find out more about silver parachutes.

Compare the differences between silver parachutes and golden parachutes and understand how stock options can work to your advantage.