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What elements should your severance agreement include?

On Behalf of | Aug 24, 2023 | employment contracts |

In many cases, company layoffs come with a severance agreement for the terminated employees. Sometimes employees find severance agreements confusing, especially if this is the first one they have received.

When you recognize the key elements of a severance agreement, you can better understand the document before you sign it.


One important part of any severance agreement is the compensation summary. The contract should define the amount of money your employer agrees to pay you upon termination. This should include not only the amount but also how and when you will receive that payment. If your severance payments come in installments, the contract should include a schedule.

Your compensation details should also include information about any benefits extension provided to you. You might receive an extension on your healthcare coverage or retirement plan contributions. Make sure your contract clearly defines the extensions and any expectations associated with them.

Release of claims

You might find that your severance contract includes a clause signing away your right to any future claims related to your employment or termination. Recent changes in the rules from the National Labor Relations Board prohibit employers from requiring this as a condition of receiving severance compensation.

Reference details

Some severance agreements include details about what a company will say in any future reference calls. This helps you understand what to expect if listing them as a reference on a future application.

Timeline for decisions

Many severance agreements offer the employee a defined amount of time to make a decision about signing the contract. This gives you time to consider your rights and the offer before you make the commitment.

When you understand the fundamental components of a comprehensive severance agreement, you can more effectively evaluate and negotiate your severance and separation. Read your severance agreement thoroughly to ensure that you understand the expectations, compensation and release of liability.