What is an employee separation agreement?

Two people sitting across from each other at a desk shake hands after signing an employee separation agreement.

Learn what employee separation agreements are, why companies use them, and what they should cover.

Sometimes, an employee and an employer just aren’t the right match for each other. These sorts of situations are never pleasant, but you can make it less difficult with an employee separation agreement. This guide outlines the basics of an employee separation agreement and what it should include.

What is an employee separation agreement used for?

An employee separation agreement establishes a contractual understanding between the employer and the soon-to-be ex-employee. By signing the document, the parties agree to its terms for terminating the employment contract.

Employers often use separation agreements to cover themselves against potential lawsuits, but they can also include clauses that benefit the terminated employee. A well-crafted employee separation agreement can actually be beneficial to both parties.

If your employee review template is getting the best improvement out of most employees but not others, you unfortunately may need to consider terminating their employment agreement.

What should an employee separation form include?

Most employee separation agreements include the following:

Waive any potential legal claims. This is often a requirement for employees. It could include employment law, compensation, and discrimination claims. For employers, this is often the primary purpose of the agreement.
Offer a severance package. In exchange for waiving the claims, an employee separation agreement can offer a severance package to the employee. Severance is not required, but it’s often a good incentive for the employee to sign the document. It can also help enhance a company’s reputation.
Detail additional clauses. The agreement can also include any number of other clauses, such as confidentiality or non-compete clauses, and require the employee to return any company tools or property.

Each state has different laws on what an employee separation agreement can include, so check the details with your local employment authority.

Process for handling a separation agreement of employment.

Once the employment separation agreement template is created, share it with your legal team or seek legal advice to ensure all statements are written in accordance with national policies.

The process will be different depending on whether the separation is voluntary or involuntary. Voluntary includes an employee quitting on their own terms or retiring. Involuntary is when an employee is asked to leave due to poor performance or other reasons. An employee who voluntarily leaves will typically provide at least a two-week notice before their departure. Involuntary leave is more immediate, and the separation agreement of employment will need to be sent sooner.

How an employment separation agreement benefits both parties.

An employee separation form is beneficial to the employer and employee because it provides clarity for how their relationship will end and what terms will look like moving forward. For employers, the separation agreement protects them from legal issues. For employees, signing this form can help them obtain a severance package upon their leave and potentially ongoing healthcare benefits.

To make signing an employee separation agreement simpler, make it a digital document. With Adobe Acrobat Sign, you can easily share documents with several recipients, request legally binding e-signatures, protect documents, and much more.