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Severance Agreement

2 signers
1 Employer
2 Employee
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Avoid Job Termination Troubles With This Severance Agreement Template

In today’s job market, security is a rarity. Nobody can ensure that their position will last indefinitely. Sometimes, employers provide terminated employees with a salary package to ease the stress and reduce the burden of sudden unemployment, especially for long-service employees. If you’ve been terminated from your position, then you need to know what severance agreements entail.
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severance agreement template
As a document used during the termination of an employee from the company, a severance agreement is a legally binding document between an employer and an employee that specifies the terms of the separation. Fired employees can expect severance benefits including things like compensation for unused vacation time, accrued sick leave, unemployment benefits, or any other accrued obligations.
Upon termination of your employment in your organization, it is always important to have everything in writing. As such, this severance agreement template can help avoid trouble for the management and employee after termination of employment takes place.

Why Employers Should Prepare Severance Agreement Documents

These severance contracts are designed primarily, so your employees don’t file a wrongful termination lawsuit against you. In considering implementing a severance agreement, you can have multiple reasons. Some businesses provide employees with severance packages in line with company policies and outline the policies well before they let the person go. Others develop remuneration plans aimed at a specific person who has important responsibilities.

The employer provides the employee with severance pay if the employee gives up certain rights, such as the right to seek damages. Severance agreements occur because workers may pursue lawsuits against employers for various legal violations under state and federal laws. Employee claims can be prevented by compensating them with a fair amount. This allows employers to “buy” employees’ rights when they terminate.

Severance agreement conditions can be customized and offer various advantages. Several positive outcomes if you offer employee severance agreements include protecting your IP, maintaining your company’s reputation, limiting the financial burden on the affected employees, and avoiding legal issues.

As you can see, there are many benefits to providing severance agreements to your employees, and they can help protect both you and your employees as well. If you are thinking about implementing one in your business, feel free to use our fillable template as a starting point.

What an Agreement for Severance Benefits Usually Contains

Every severance agreement is different, and the specific details will depend on your individual situation. However, most of them will generally include information about compensation for accrued vacation time, salary and benefits coverage, medical insurance, insurance coverage, unemployment insurance eligibility requirements, and other relevant details.

Some of the main elements included in a severance agreement include:

  • The date the agreement was entered into
  • The name and contact information for both parties involved in the agreement (employer and employee)
  • The date of employee’s termination
  • The terms and conditions the parties agree on
  • Certain clauses advising employees of their rights under federal law
  • Signature lines, ensuring both the employer and employee signs the agreement

Note that you can use our template freely, but it would still be best to consult an employment lawyer to ensure that your severance agreement contains all the necessary information and meets legal requirements.

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Protecting sensitive company information

If you have highly confidential information or sensitive company property, it is essential to ensure that this does not get into the hands of your competitors.

Maintaining a good employer reputation

Providing severance compensation can help ensure that you retain a good reputation in your industry, even if you must let an employee go. It also restricts your former employee from disparaging you as their former employer.

Limiting any financial burden for the terminated employee

Many employees struggle financially when they are let go from their job, especially if they have a family to support. Offering severance packages can help alleviate some of that financial stress.

Avoiding legal trouble for the company

If you provide employees with severance packages and written agreements, you can help protect yourself against any legal troubles that may arise after the termination.

FAQ About Severance Agreements

A severance agreement is a binding contract that employers can ask departing employees to sign after being fired. In most cases, a terminated employee agrees not to seek damages against their employer if the employer pays a generous amount.
Yes. If an employer does not pay severance compensation in advance to workers who were laid off, there may be legal consequences for the company if you are terminated without cause.
Severance payments usually vary largely according to service durations. In some examples, a remuneration agreement may say an employee might receive between one to two weeks of paid salary for every year of service at their workplace.
Yes, you can refuse a severance package offer if you feel that it is not fair or adequate. You usually have a 21-day period to accept or decline a severance agreement.
Though commonly confused, termination pay and severance pay are two distinct forms of compensation. After three months of work, all employees are eligible for termination pay if dismissed, yet not everyone is entitled to severance payments. Lump sum severance payment packages usually apply to long-serving or specific-skilled employees.
A severance package over 40 is a specific type of severance agreement that applies to older workers. These agreements are intended to clearly state that the termination has nothing to do with an employee’s age, in compliance with the Age Discrimination in Employment Act.

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