ClauseryFree severance agreement template (Word)
A contract between employer and departing employee offering a severance package (pay, continued benefits, outplacement) in exchange for a release of legal claims against the company.
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A severance agreement (or separation agreement) offers a departing employee extra compensation or benefits beyond what they are owed, in exchange for signing a general release of claims against the employer. It may also include non-disparagement, confidentiality and cooperation clauses.
Workers over 40 have special protections under the OWBPA (part of the Age Discrimination in Employment Act): they must be given at least 21 (or 45 in a group layoff) days to consider the agreement and 7 days to revoke after signing. Have counsel review agreements involving laid-off employees or workers over 40.
What to include#
- Parties and date. Employer and employee names, date of agreement, last day of employment.
- Severance payments. Amount of severance pay (often X weeks per year of service), pay schedule (lump sum or salary continuation), and when payments begin.
- Benefits continuation. Continued health-insurance premiums, outplacement services, equity treatment (extended exercise window), and accrued bonus/commission owed.
- Release of claims. Employee releases known and unknown claims against the company (and affiliates, officers, employees) up to the signing date, excluding non-waivable claims.
- Other clauses. Non-disparagement (mutual where allowed), confidentiality of the agreement terms, return of company property, cooperation in future matters, non-compete/non-solicit confirmation, and governing law.
How to fill it in#
Step 1: Decide the package
Set severance amount, benefit continuation and any extras based on tenure, role and the circumstances.
Step 2: Comply with OWBPA if over 40
Include the 21/45-day consideration period, 7-day revocation period and (for group layoffs) the required disclosure of job titles/ages.
Step 3: Attach the release
List categories of claims released and explicitly carve out non-waivable rights (workers comp, unemployment, vested benefits, right to report to agencies).
Step 4: Present after termination
Hand or send the agreement after the termination meeting; give the employee the legally required time to review and sign.
Step 5: Pay on schedule
Make the first severance payment once any revocation period has expired; continue per the schedule.
Related templates and guides
Questions
Is severance required?
No unless an employment contract, policy, or plan promises it. Most severance is voluntary in exchange for a release.
Can an employee sue after signing?
Only for claims that cannot be waived by law (e.g. workers comp, certain wage claims, future discrimination, right to file with EEOC).
What is the OWBPA?
The Older Workers Benefit Protection Act: requires 21 days (45 in group layoffs) to review and 7 days to revoke for workers over 40.
Do I need to pay extra for non-disparagement?
In some states (e.g. California), non-disparagement/confidentiality clauses in severance require an additional payment and cannot prevent disclosure of unlawful acts.
How much severance is typical?
1-2 weeks of pay per year of service is common for individual contributors; more for executives. There is no legal minimum.
These are general templates, not legal or tax advice. Have anything unusual reviewed for your jurisdiction.