Severance Agreement Clauses: What You're Signing Away
What This Clause Does
A severance clause spells out what compensation you'll receive if the company terminates your employment. This can include weeks or months of base salary, continuation of health benefits, and accelerated vesting of equity. Without a severance clause, you're generally entitled to nothing beyond your last paycheck.
Severance is often conditioned on signing a release, meaning you give up your right to sue the company in exchange for the payment. Read the release carefully before signing. It's also worth checking whether severance applies only to layoffs or also to termination "without cause."
Example Clause Pattern
"In the event Company terminates Employee's employment without Cause, Company shall pay Employee a severance amount equal to [X weeks/months] of Employee's then-current base salary, subject to Employee executing a general release of claims in a form acceptable to Company."
What to Watch
- Severance is conditioned on signing a broad release within an unreasonably short window (less than 21 days)
- No severance provided for termination without cause
- Severance stops if you accept new employment, even at a much lower salary
- Release includes claims you haven't yet been paid for (e.g., unpaid commissions)
What to Negotiate
- Negotiate a minimum severance floor: at least 4 weeks' base pay per year of service
- Request continuation of health benefits through COBRA or as part of the severance package during the payout period
- Push for a 21-day review window on the release of claims — required by law for ADEA waivers for workers over 40
- Ask that equity vesting accelerate or continue during the severance period, not just base salary
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Found in These Contracts
This clause commonly appears in the following contract types:
Frequently Argued Questions
What is a severance clause?
A severance clause specifies what compensation you'll receive if the company terminates your employment. This can include weeks or months of base salary, continued health insurance, accelerated equity vesting, and outplacement support. Without a severance clause, you're generally entitled only to your final paycheck — most states don't require employers to pay severance at all.
Do I have to sign a release to receive severance?
Usually yes. Most severance offers are conditioned on signing a release of claims, meaning you give up your right to sue the company in exchange for the payment. If you're over 40, federal law (ADEA/Older Workers Benefit Protection Act) requires the company to give you at least 21 days to review the release and 7 days to revoke it after signing. Read the release carefully before signing — you may be waiving significant legal rights.
How much severance should I negotiate?
Common benchmarks are 1 to 4 weeks of base salary per year of service. Junior employees often receive 2 weeks' salary as a standard offer. Senior employees and executives typically negotiate 3 to 6 months or more. In addition to base salary, try to negotiate for benefit continuation during the severance period and clarity on whether unvested equity accelerates or is forfeited.
Negotiation Strategies
Negotiate a minimum of 4 weeks' base pay per year of service
Request COBRA continuation coverage as part of the severance package
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