Severance Agreement Template

By | October 22, 2015

It is very common that employees work in different companies for their entire professional career. Joining another company can only happen by leaving the previous employment and employer and when that happens, the professional relationship between employer and employee is severed. The severance agreement which is also known as the termination agreement is a professional document to include the terms on which the termination or severance is being conducted.

Brief Description of Severance Agreement:

When an employee is hired in a company, most companies ask new recruiters to sign a severance agreement at the beginning. This agreement allows the employers to take essential steps in order to fire the employee. There are also many companies that don’t ask employees to sign this agreement but they wait until it’s time to go through the termination process. When it’s time to lay off an employee due to any reason or when the employee decides to leave the company and join another organization, both the employee and employer need to go through a specific process which is included in the severance agreement.

For example, in the severance agreement, employer agrees to pay good compensation to the employee for firing him or give him two months so that he can find a new job and in return, the employee agrees not to sue the company for the termination without any reason. On the other hand, when the employee wants to leave a company, he offers to work for 1 more month so that the employer can find a substitute and in return, the employer gives good reference and remarks to the employee for his professional career in another company. This all is done on the severance agreement in which both parties include the terms and conditions that they want and with mutual agreement, they design the entire agreement that benefits both the employer and employee.

Here is preview of a Free Printable Severance Agreement Template created using MS Word,

Severance Agreement Template

Key Elements to Add in the Severance Agreement:

  • Name of the employer/company
  • Name of the employee who is leaving the company
  • Reasons why the employee is leaving
  • Terms and conditions of the agreement
  • Mutually agreed clauses of the agreement
  • Compensation for the employee
  • Limitations of the employee for future employment
  • Termination of the agreement
  • Results of violation of the agreement
  • Signature of employer and employee

Importance and uses of severance agreement:

When companies want to lay off employees or employees decide to leave the company without any specific reason besides getting better chances in another company, it can lead to a difficult situation in which the employee may sue the company for termination or the employer sues the employee for leaving the company before the employment contract ends. In order to make both parties happy, they sign the severance agreement in which both agrees to get what they want and offer something as compensation to the other party so they can both benefit from the break of the professional relationship between the employer and employee. This is a legal agreement and in case anyone violates it, the other party has the right to take it in court and use it as evidence.

Here is download link for the above shown Severance Agreement Template,
download template

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