How to Write a Severance Agreement

A severance agreement (also called a separation agreement) sets the terms of an employee's exit: what they will be paid or given, and what they give up in return — usually a release of legal claims against the employer. It is one of the documents where local employment law matters most. Treat this guide as a map, not a substitute for advice.

Our free severance agreement template includes a general release and the common U.S. consideration / revocation periods.

1. End date and final employment status

State the last day of employment, whether the person is eligible for unused leave payout, and that employment is ending. Do not leave the termination date vague.

2. Severance pay as consideration

List the money or benefits the employee receives only if they sign — salary continuation, a lump sum, a period of health coverage, outplacement. That package is the consideration for the release. Without something extra beyond what they were already owed, a release may not hold.

3. The general release

In exchange for those benefits, the employee typically releases claims arising from the employment and its ending (discrimination, wrongful discharge, unpaid amounts that are not legally unwaivable, and similar matters). Some claims cannot be waived in some places — wage statutes and future unknown rights vary. This is why legal review is especially important here.

4. The U.S. 21-day and 7-day rule (age 40+)

Under U.S. federal law (the Older Workers Benefit Protection Act, part of the ADEA), a release of age-discrimination claims for an employee aged 40 or older generally must give at least 21 days to consider the agreement and 7 days after signing to revoke it. Our template includes both. If you are outside the U.S., or the employee is under 40, those periods may not apply — do not copy them blindly.

5. Confidentiality, non-disparagement, references

Many agreements add confidentiality about the terms, a mutual non-disparagement clause, and a neutral reference. Keep these reasonable; some jurisdictions limit non-disparagement in employment exits.

6. Time to consider, then sign

Give the employee time to read the agreement (and, where required, to revoke after signing). Both sides should sign. Electronic signatures are widely used for these documents, but follow any local form rules. For the job itself, see how to write an employment contract.

Disclaimer: This article is for general informational purposes only and is not legal advice. Employment and release law varies widely and can invalidate a poorly drafted agreement. Have a qualified lawyer review a severance agreement before you use it.