Some employees who are being let go from a job will be asked to sign a severance agreement, which is a contract that extends certain pay and benefits after employment ends. In exchange for those benefits, the employee might be asked to give up certain rights.
Before signing a severance agreement, employees should understand what they receive, what they agree to do and how the agreement impacts future work.
Benefits vary widely
Severance terms vary greatly from person to person and can even position to position within the same company. Because of this, it’s critical that anyone who’s being presented with a severance agreement reads the terms before they sign.
Some of the common benefits that are provided include either a lump sum payment or continued salary for a specified period. Health insurance support, unused vacation pay, neutral references and similar benefits may also be offered.
Responsibilities can be strict
Your responsibilities can be strict. Many severance agreements include confidentiality, nondisparagement and cooperation clauses that can limit what you’re allowed to do after the severance. Return of company property and a release of claims are possible. The release of claims is a major requirement because it prevents you from being able to take any legal action against the employer.
It can be tempting to focus solely on what you’re getting out of the severance agreement at termination without considering what responsibilities you have. Because stress is typically high since you’re facing the loss of your income, it’s likely best to work with someone who can evaluate the agreement with you to ensure you understand exactly what everything means.