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Separation Agreement

Separation Agreement

The Employer and Employee may be referred to individually as “Party” and collectively as “Parties”.

This Employment Separation Agreement (“Agreement”), is made valid upon signature by both Parties (the “Effective date”).

1. General

1.1 Considering their mutual covenants, and for other good and valuable consideration in this Agreement, of which the receipt and sufficiency are hereby acknowledged, the Parties further agree to the provisions below:

1.2 Nature of Separation: The Parties, who previously entered into an employment agreement on [Insert Date], now hereby agree to discontinue the Employee’s employment relationship with the Employer as [Insert Designation], effective on [Insert “Separation Date”] (hereinafter referred to as the "Separation Date") in an amicable manner according to the terms and conditions provided in this Agreement.

2. Terms and Conditions:

2.1 Severance Pay: The Employer agrees to make a single payment to the Employee in the amount of [Insert Amount & currency] as a severance payment. This payment shall be subject to appropriate taxes and other payroll deduction required by law.

2.2 Separation Period: The Employee shall be given [Insert days] business days after the Separation Date to prepare for the transition of work to the new employee who will take over the duties and responsibilities. 

2.3 Return of Property: The Employee shall return all of the Employer’s properties within [Insert Date] business days following the Separation Date. The said properties include but are not limited to any files, documents, handbooks, manuals, computer printouts, credit cards, vehicles, equipment, tools, phones, radios, other electronic data, and any other form of property the Employer owns. 

2.4 Release of Claims: The Employee hereby releases and forever discharges the Employer, including its assign, representatives, affiliates, successors, and current employees from any claim, demand, causes of action, obligations, damages, liabilities, and charges, which may have arisen during an employment period. 

2.5 Breach: The Employee acknowledges that any breach of obligations herein is considered a material breach. Thus, the Employer shall be entitled to appropriate injunctive relief and to recover reasonable cost and legal fees incurred if the Agreement is threatened by breaching. 

2.6 Non-Compete: The Parties agree that the Employee, during the employment period, shall not engage in any activity that directly or indirectly competes with the business of the Employer. Furthermore, the Employee shall be given [Insert time period] before applying to a company of similar nature as the  Employer. 

2.7 Entire Agreement: This Agreement, along with the attached documents, shall constitute the entire Agreement between the Parties. This Agreement shall also overrule any previous agreement, either verbal or written. 

What is a separation agreement?

For instance, this type of agreement is more common when an employee is laid off (rather than fired) or chooses to resign. As opposed to a termination letter, which may cast a negative impression of the employee, a mutual arrangement is less damaging to their professional reputation. Other reasons for employment separation include employee injury or illness, employer lack of funds or work, and employee wrongdoing. 

What to include in a separation agreement?

The separation agreement must state the employee’s termination date and that the employer is up to date with all current payments due. If the employee will be given any severance pay, the amount and manner of payment will also need to be addressed in the form. The calculation of the severance is often included in a prior employment or severance contract. Any company property that the employee needs to return should also be put into writing to ensure its return. In addition to any existing non-disclosure agreement (NDA) that the employee may have with the employer, the employer may include a non-compete clause in the agreement which places restrictions on the employee’s ability to compete against the employer’s business.

The contract must be signed by both parties to become legally binding. Do note that non-compete clauses are not always enforceable depending on your country, state and industry.

The separation agreement lists the conditions both parties agree to and the legalities of binding the contract. The conditions will supersede other agreements, including your employment contract, so examine the terms carefully.

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