Simple Severance Agreement

What is a severance agreement and when should you use it?


A severance agreement is a contract between an employer and an employee that sets out the details of the compensation package the employee gets in exchange for the termination of their employment.

A severance agreement is generally used in situations like a redundancy – where an employee decides to take up voluntary redundancy – and then agrees final terms with the employer.

The main purpose of a severance agreement is to agree final terms but more importantly to prevent employees from filing a wrongful dismissal claim against you.

You don’t have to use a severance agreement every time someone leaves your business – for example, when you fire someone for gross misconduct.

But they are certainly useful in voluntary redundancy situations or where a senior employee is a bad fit for your business.

This template is a simple severance agreement that will suffice for most redundancy situations.

The consequences of such an agreement cannot be overstated, particularly if there is or was a dispute between the parties.

In any settlement agreement of this nature it is always recommended that the employee be advised to get independent legal advice in relation to the Agreement.

Independent legal advice, prior to the execution of a settlement or exit agreement, is designed to ensure that the employee concerned, is fully appraised, of the consequences of signing the agreement.

In cases where the employee brings a claim, the WRC will need to be satisfied that there was informed consent before the Agreement was signed.

This template agreement contains a clause which advises the employee to get independent legal advice and  also provides for the company to make a contribution toward the cost of taking that legal advice to assist him/her understand the meaning and effect of the terms of the agreement.

It also contains an acknowledgement that he/she has availed of such advice.

If you are considering a redundancy, check out our step by step guide to handling redundancies.

This is a practical, easy to follow step by step action plan to help you handle redundancy issues with confidence.

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