When the time comes to terminate an employee, a written severance agreement helps protect your business. Many businesses underestimate the value of a severance agreement and may face later complications as a result.
There are several reasons why you should consider a written severance agreement for every employee separation.
Sets expectations
A written severance agreement defines severance pay, benefits continuation, references and other relevant matters. This avoids confusion or disagreements later on about the details of the agreement. Both parties know what to expect going forward.
Limits liability
A severance agreement will often contain a waiver from the employee agreeing not to sue the company for claims related to their employment or termination. This releases the company from legal liability and protects them from the expense of potential litigation. In some cases, employees receive compensation in exchange for signing the waiver.
Maintains confidentiality
Severance agreements usually contain non-disclosure and non-disparagement clauses. These provisions prevent the departing employee from sharing proprietary information or speaking negatively about the company in a way that could damage their reputation. This protects the company’s business interests.
Provides closure
A severance agreement helps provide closure for both the company and the departing employee. It outlines a clear transition plan rather than leaving things open-ended. This can allow the business and former employees to move forward.
Having a written severance agreement in place allows businesses to end employment relationships in a fair, legal and cost-effective manner. Protecting the company from liability and maintaining confidentiality are key advantages severance agreements offer.
