Separation Pay & Agreement
By Laura Duggan
Offering severance pay is a way of professionally terminating an agreement where everyone feels okay about a situation that could be distressing.
When terminating an employee, the question of severance pay arises. Sometimes the amount has already been determined in the employment contract. At other times, it is not clear cut.
When at all possible, if you can give someone appropriate severance pay, it is in your and their interest to do so. This is especially true when it is not clear cut that the termination was due to poor performance. Offering severance pay is a way of professionally terminating an agreement where everyone feels okay about a situation that could be distressing.
Along with offering severance pay, there should be a legally binding separation agreement. This agreement is a legal protection for the company, and spells out the conditions under which the termination is occurring.
The agreement will generally include the following sections:
- Company name, (and all related entities) and Employee Name
- Amount payable, minus taxes
- Waiver of further claims by employee
- Waiver of further rights or complaints
- Confidentiality of the terms of separation
- Acknowledgement of confidentiality agreements
- Dispute options
It is best to have a lawyer or professional HR company draw up the separation agreement. Each state may have specific laws regarding these types of agreements, so be sure to follow them.