Severance Agreement Template: Pay, Release and Benefits

SEVERANCE AGREEMENT FAQ

What is a Severance Agreement?

A Severance Agreement is a legally binding contract between an employer and a departing employee that defines termination terms, severance payments, continuation of benefits, and obligations after employment ends.

Why is a Severance Agreement important?

It provides clarity, prevents disputes, and protects both parties. For employers, it secures release of claims and ensures confidentiality. For employees, it guarantees compensation, benefits, and fair treatment during separation.

When should you use a Severance Agreement?

Use it when terminating an employee, during layoffs, restructurings, or mutual separations — especially for mid- to senior-level employees or where additional compensation is offered.

What should it include?

It should specify severance pay, benefits continuation, final paycheck details, confidentiality, non-disparagement, return of company property, release of claims, and governing law.

Is a Severance Agreement mandatory?

Not always. It is typically offered at the employer’s discretion, unless required by an employment contract, collective bargaining agreement, or local law.

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