Commercial

Severance agreement template

Use this severance agreement to ensure a smooth and amicable parting of ways between employer and employee.

Our templates are for general information only. You should not rely on them, and Juro is not liable for any reliance on them. The templates might contain errors, including unlawful provisions and might create risks and liabilities if used. The templates are not legal advice, nor a substitute for it. By accessing any template, you accept these terms and agree that any use is at your own risk. Some of these templates were created using generative AI with human-assisted prompts.

Navigating the complexities of employee departures can be streamlined with a well-crafted severance agreement.

Whether it's due to layoffs, mutual separation, or other forms of employment termination, a severance agreement is a vital tool for both the employer and the employee.

Let's delve into what severance agreements are, their typical use cases, and how to create one effectively.

What is a severance agreement?

A severance agreement is a contract between an employer and an employee that outlines the terms of the employee's departure.

This contract typically includes details about severance pay, benefits, and any confidentiality or non-disparagement clauses. It serves to provide a clear end to the employment relationship and to minimize potential disputes or legal actions post-termination.

Types of severance agreements

Severance agreements can be unilateral, where only the employer sets the terms, or mutual, where terms are negotiated and agreed upon by both parties.

Mutual agreements are common in executive-level departures where negotiation power is more balanced.

When should you use a severance agreement?

Severance agreements are particularly useful in the following scenarios:

Organizational restructuring. When a company undergoes restructuring that results in layoffs, severance agreements can facilitate a smoother transition for affected employees.
Performance issues. If an employee is being let go due to performance issues, a severance agreement can help avoid potential legal claims by offering a structured separation package.
Voluntary departures. In cases where an employee chooses to leave voluntarily, a severance agreement can outline any final compensation and ensure a clean break.
Retirement. When an employee retires, a severance agreement can detail any retirement benefits and ensure the company's interests are protected.

Who creates severance agreements?

Severance agreements are typically drafted by legal or HR departments. They ensure that the company's interests are safeguarded and that the agreement complies with employment laws.

What should a severance agreement template include?

A comprehensive severance agreement should cover:

Details of the parties involved. Names and roles of the employer and employee.
Compensation and benefits. Terms of severance pay, continuation of benefits, and any outplacement services.
Confidentiality. Clauses to protect sensitive company information post-employment.
Non-disparagement. Provisions to prevent negative statements from either party.
Return of property. Requirements for the employee to return company property.
Legal obligations and rights. Any legal rights the employee is waiving and obligations they must adhere to, such as non-compete clauses.
Dispute resolution. How any disputes related to the agreement will be resolved.
Legal jurisdiction. The legal jurisdiction that governs the agreement.

Managing severance agreements manually

The traditional process of creating a severance agreement can be cumbersome, involving back-and-forth communications and multiple document versions. This can lead to inefficiencies and errors.

Common pain points when creating severance agreements

Time-consuming. Drafting and negotiating terms can be a lengthy process.
Version control. Keeping track of the most current template can be challenging.
Legal compliance. Ensuring the agreement complies with all relevant laws and regulations.

Why you should automate severance templates

Modern businesses are turning to automation to streamline the creation of severance agreements. Automated templates can generate agreements quickly, ensure legal compliance, and reduce the administrative burden.

The benefits of automating your severance agreement template

Consistency. Automated templates ensure that every agreement is up-to-date and standardized.
Efficiency. Reduces the time spent on drafting and negotiating agreements.
Compliance. Helps maintain compliance with employment laws and reduces legal risks.