Every individual has the rights to negotiate how they choose to leave a company or organization in very much the same way they can negotiate salaries and benefits. The legally recognized way of doing this is signing a severance agreement.

In this severance agreement, the financial terms on which the employee is to leave the company will be agreed upon. This article talks a lot more about a severance agreement, what should be included in it and why it is so important.

What Is a Severance Agreement?

A severance agreement is a legal contract between an employer and employee outlining the terms, conditions and guidelines to be followed in laying off the employee.

Also known as employee separation agreements, a severance, release of claims for employment, letter of termination, it highlights how much the employees will be paid when their job is terminated, when their benefits will be discontinued, among other things.

What Should Be Included in a Severance Agreement?

The contents of an employee severance form typically addresses timelines, benefits overview and consideration. While a consideration is usually the severance pay, the benefits overview encompasses a lot more elements like insurance benefits etc.

The usual elements of a severance agreement are:

  • Separation date
  • Consideration package: Severance payment in lieu of contractual notice period
  • Return of company property
  • Extended benefits package including health benefits or insurance and the duration of time over when they will accrue to the employee.
  • Acknowledgement of payment of wages
  • General release of claims
  • Acknowledgement of waiver of claims under ADEA
  • Covenant not to sue
  • A non-compete clause: Once signed, the employee is forbidden from working for a direct competitor for a given period clearly stated in the agreement document.
  • A non-disparagement clause
  • Non-solicitation
  • No admission of liability
  • An agreement that the parties involved bear their own costs
  • Indemnification

Why Is a Severance Agreement So Important?

A severance agreement is important for the following reasons:

  • Prevents employee from filing a wrongful termination suit
  • Aids transition between jobs
  • Helps the laid-off employee access to some benefits during their job hunt period.


Can I sue if I signed a severance agreement?

If an employee receives a release or waiver after signing a severance agreement, he/she gives up the rights to sue the company. However, if the employee doesn’t get a waiver/release, he/she is still entitled to suing the employer.

Can I refuse a severance package?

Yes, you can. Should an employee refuse to sign a severance package, the employer has no rights to force the employee to do so. However, the latter can legally refuse to pay employees their entitlement if they do not sign a release of claims.

What is the generally acceptable severance package?

The amount differs from job to job. However, the average pay period is one to two weeks for every year the employee worked. Top and middle executives usually have the luxury of being paid over a longer period.

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By signing a severance agreement, employees waive their right to sue the employee on grounds that they were wrongly laid off. That is why it is important to properly understand the contents of the separation form. If you’ve been searching for an employee separation agreement template to work with, you’ve come to the right place. On CocoSign, you will find several templates to work with.


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