Severance Package Template

In plain language: Identifies the employer and employee as legal entities, states the effective separation date, and briefly sets out the background — why the agreement is being entered into.

Common mistake: Using the employer's trade name instead of the registered legal entity name — creating enforceability ambiguity if the operating name and legal name differ.

In plain language: States the total severance amount, how it is calculated, and whether it is paid as a lump sum or in regular installments on the normal payroll cycle.

Common mistake: Failing to specify whether payment is a lump sum or installment — which matters significantly for income tax timing and for what triggers clawback if the employee breaches the agreement.

In plain language: Addresses what happens to health insurance, life insurance, and other benefits after the separation date — including COBRA election rights and any employer subsidy of premiums.

Common mistake: Promising a specific dollar subsidy of COBRA premiums without confirming the current plan premium — the amount changes annually and the contract may understate or overstate the actual cost.

In plain language: The employee releases all known and unknown claims against the employer — including wrongful termination, discrimination, harassment, and wage-and-hour claims — in exchange for the severance consideration.

Common mistake: Including an overly broad release that purports to waive future claims or claims that cannot be waived by law — such as the right to file an EEOC charge — which can render the entire release void in some jurisdictions.

In plain language: For employees aged 40 or older, a specific acknowledgment that the employee has 21 days to consider the agreement (45 days for group layoffs) and 7 days to revoke after signing.

Common mistake: Using a 21-day period for a group RIF instead of the required 45-day period — invalidating the ADEA waiver for every employee in the group, even those who have already signed.

In plain language: Prohibits both the employee and the employer's representatives from making public statements that harm the reputation of the other party after separation.

Common mistake: Making the non-disparagement clause one-sided (employee only) without considering that some states — including California — require mutual non-disparagement to be enforceable as of 2022.

In plain language: Requires the employee to maintain confidentiality of the agreement's terms and the company's trade secrets, and to return all company property — devices, documents, access credentials — by a specified date.

Common mistake: Setting a property return deadline that falls after the separation date but before any severance payment — giving the employee an incentive to delay return without creating a clear breach trigger.

In plain language: Incorporates or restates any surviving non-compete, non-solicitation, or IP assignment obligations from the original employment contract, confirming they survive separation.

Common mistake: Attempting to introduce new restrictive covenants in the severance agreement that were never in the original employment contract — courts in most jurisdictions will not enforce them without new independent consideration beyond the severance already being paid.

In plain language: States explicitly that the agreement and the payment are not an admission by either party that any wrongdoing or legal violation occurred.

Common mistake: Omitting this clause entirely — without it, plaintiffs' attorneys can argue in subsequent litigation that the severance payment itself is evidence of liability.

In plain language: Specifies which jurisdiction's law governs the agreement, confirms this document supersedes all prior agreements, and sets the mechanism for resolving disputes.

Common mistake: Choosing a governing law with no connection to where the employee actually worked — many jurisdictions, including California, apply local employment law regardless of the contract's choice-of-law clause.

A severance package is a legally binding agreement between an employer and a departing employee that sets out the compensation, benefits, and obligations attached to the end of employment. It typically includes a severance payment calculated on years of service, continued health coverage or COBRA subsidy, a release of legal claims, and post-separation obligations such as confidentiality and non-disparagement. The employer pays severance in exchange for the employee's release of claims and agreement to cooperate with transition.

In the United States, federal law does not require severance pay — it is a matter of contract or company policy. However, if a company policy or employment contract promises severance, that promise is generally enforceable. In Canada, provincial employment standards laws set minimum notice or termination pay requirements that function as a statutory floor on severance. In the UK and EU, statutory redundancy pay and notice entitlements are legally mandated regardless of whether a written severance agreement exists.

A complete severance package covers: the separation date and final pay logistics, severance pay calculated on a defined formula (commonly 1–4 weeks per year of service), benefits continuation or a COBRA subsidy, a general release of all employment-related claims, ADEA waiver language for employees aged 40 or older, non-disparagement and confidentiality obligations, return-of-property requirements, and governing law with an integration clause. Packages for senior employees often add extended vesting acceleration, bonus proration, and outplacement services.

The most common formula in the US is one to two weeks of base salary per year of service, with a minimum of two to four weeks. Senior employees typically negotiate higher multiples — four to eight weeks per year is not unusual at the director level or above. In Canada, common-law notice obligations (which severance is meant to satisfy) can reach one month per year of service for long-tenured employees. UK statutory redundancy pay uses a tiered formula based on age and years of service, with a weekly pay cap updated annually.

Yes. Severance offers are negotiable, particularly for senior employees, long-tenured staff, or in situations involving potential legal claims. Common negotiating points include increasing the severance multiplier, extending the COBRA subsidy period, accelerating vesting on unvested equity, adding outplacement services, and modifying the scope of the non-disparagement clause. Employees aged 40 or older have a statutory 21-day consideration period specifically to allow time for negotiation and legal review.

An ADEA waiver is a specific release of age discrimination claims under the Age Discrimination in Employment Act. It is required — and must meet specific statutory standards — any time the severance agreement releases claims for employees aged 40 or older. The waiver must be written in plain language, must specifically reference the ADEA, must advise the employee to consult an attorney, must provide a 21-day consideration period (45 days for group layoffs), and must allow a 7-day revocation window after signing. Agreements that omit any of these elements cannot release ADEA claims.

No. A severance agreement cannot lawfully prohibit an employee from filing a charge with the EEOC or equivalent state agency, cooperating with an EEOC investigation, or participating in EEOC proceedings. However, a valid release can waive the employee's right to receive monetary damages from any resulting lawsuit. Include explicit carve-out language preserving these rights — omitting it risks the EEOC treating the release as unlawfully coercive, potentially voiding the entire agreement.

For employees aged 40 or older, the ADEA provides an absolute 7-day revocation right after signing. If the employee revokes within that window, the agreement is void and no severance is owed — the employer keeps its money and the employee retains all claims. To protect the employer, structure the first severance payment to fall after the revocation window closes. For employees under 40, there is no statutory revocation right, though many agreements include a shorter contractual cooling-off period as a matter of fairness.

For most standard terminations involving salaried employees with no active legal claims, a high-quality template reviewed by HR is sufficient. Legal review is strongly recommended for terminations involving employees aged 40 or older (ADEA compliance), group layoffs triggering OWBPA and WARN Act obligations, executives with equity and complex severance entitlements, employees in heavily regulated industries, or any situation where the employee has already filed a complaint or hinted at litigation. A focused employment attorney review typically costs $400–$900 and is a sound investment against a wrongful termination claim.