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When employment ends, a severance agreement records what the employer pays and what the employee agrees in return. Answer a few questions and you will have a document to review.
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A severance agreement records what an employer pays when employment ends, and what the departing employee agrees in return. Usually the employee signs a release of claims.
That exchange is the whole point. The employer offers something beyond what it already owes. In return the employee gives up the right to sue over the job or its ending.
That word beyond carries weight. Earned wages, accrued leave the policy promises, and final pay are not severance, because the employee already earned those.
Nothing obliges most employers to offer it. Unless a contract, a policy, or a benefit plan promises severance, the decision sits with the employer.
This is also the document where getting it wrong costs most. A release that fails leaves the employer having paid the money and kept the risk.
Timing matters as well. An offer made before the departure decision is final reads very differently from one made afterwards.
Write the exchange plainly, so neither party can later claim they misunderstood it.
State the amount, whether it arrives as a lump sum or instalments, and the date it lands. Vagueness here undermines everything built on top of it.
Identify what the employee receives over and above earned wages and accrued entitlements. A release supported by nothing extra stands on weak ground.
Name the entity signing on the employer side, especially where a group company employs the worker. The wrong signatory weakens the release.
Describe the claims released in plain terms. Private agreements cannot waive every claim, and the list differs by jurisdiction. So have the wording checked before you use it.
Say what the release does not touch. Vested retirement benefits, workers compensation rights, and the ability to contact a government agency normally sit outside it.
Where you may need help with a handover or a later question, say so. Then say whether you pay for that time.
A severance agreement causes fewer arguments once the money mechanics appear in writing. Write them out plainly.
Set the date or the trigger. Many agreements pay only after any revocation period closes, so check the sequence before promising a date.
Where payment runs in stages, say what happens if the employee breaches a term partway through. Also say whether instalments stop or become repayable.
Tax authorities normally treat severance as wages. Confirm the treatment with your payroll provider or accountant rather than assuming it.
Say when existing coverage ends and whether the employer contributes toward any continuation. Continuation rules are technical, so check them before making a promise.
Where you offer career support or training, say what it covers and how long it lasts. These carry real value and cost little to state clearly.
Deal with unvested equity, pending bonuses, and commissions on deals still closing. Name a date for each. People forget these more often than the severance figure itself.
A release only helps if it holds up. So the process around signing matters as much as the wording inside it.
Give the employee a meaningful period to think. Required periods differ depending on the employee’s circumstances and the claims involved, so confirm what applies to yours.
State in the document that the employee may consult an attorney. Many employers go further and recommend it in writing.
Some releases must let the employee change their mind after signing. Check whether that applies before you set the payment date.
Avoid deadlines that feel coercive, and avoid presenting the offer in a way that leaves no room to read it. Pressure produces the signatures people later challenge.
Both parties sign and date the same version, and the employee keeps a copy. Then file it where you can find it years later.
The terms around what everyone says afterwards deserve as much care as the payment.
Decide whether the amount stays private, and name who may be told. Spouses, tax advisers, and lawyers are the usual exceptions.
Broad clauses here have drawn regulatory attention, and enforceability varies. Keep any wording narrow and take advice before relying on it.
Confirm the employee may still speak to a government agency or take part in an investigation. Agreements that appear to block this cause problems of their own.
Agree what the employer will say, who says it, and where inquiries go. Also decide whether the employee sees the wording first.
List the equipment, records, and credentials coming back, with a date. Then confirm system access ends on the same day, since forgotten logins outlive most departures.
A few checks before the conversation save considerable trouble afterwards.
Read the employment contract, the handbook, and any severance plan first. One of them may already commit you to more than you intended to offer.
Compare what you are offering with what similar departures received. Unexplained differences invite questions you would rather not answer. Keep a short note of the reasoning behind any difference.
Decide whether existing non-compete or non-solicit terms continue, end, or change. Enforceability varies considerably by state, so confirm your position.
A severance agreement repays an employment attorney’s fee more reliably than most documents. That cost sits far below the price of a release that fails.
The agreement does not decide unemployment eligibility. A state agency makes that call, whatever the paperwork says.
Prepare the paperwork before the conversation rather than during it. Customize a severance agreement template, have it reviewed, and give the employee proper time to read it.
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