Severance Agreement Template for England and Wales

A Severance Agreement is a legally binding contract between an employer and a departing employee that sets out the terms of their employment ending. It typically offers the employee a financial package beyond their basic entitlements in exchange for agreeing to certain conditions, like keeping company information confidential or not making claims against the employer.

Under UK employment law, these agreements must be reviewed by an independent solicitor to be valid. The document often includes details about final salary payments, benefits continuation, reference arrangements, and any post-employment restrictions. Most employers use them to create a clean break and reduce the risk of future employment disputes.

Use a Severance Agreement when ending employment relationships sensitively, especially with senior staff members or in potentially contentious situations. These agreements prove particularly valuable during company restructures, redundancy programmes, or when addressing performance-related departures that could otherwise lead to tribunal claims.

The timing matters - introduce the Severance Agreement early in exit discussions to protect both parties. It works best when you need to safeguard confidential information, maintain business relationships, or ensure a smooth leadership transition. Many UK employers also use them to prevent damaging publicity or preserve team morale during organisational changes.

• Severance Contract: Standard comprehensive agreement covering all termination terms and conditions
• Voluntary Severance Agreement: Used when employees choose to leave during restructuring programmes
• Severance Package Letter: Simpler format outlining key terms without full contractual detail
• Layoff Separation Agreement: Specifically designed for redundancy situations involving multiple employees
• Non Disparage Agreement: Focused version emphasising confidentiality and reputation protection

• Employers: Initiate and draft Severance Agreements, typically through their HR departments or legal teams, and bear the financial obligations
• Departing Employees: Review, negotiate, and sign the agreement in exchange for enhanced benefits beyond statutory minimums
• Independent Solicitors: Must review and certify the agreement for the employee, explaining its terms and implications
• HR Directors: Manage the process, coordinate with legal teams, and ensure compliance with employment policies
• Board Members: Approve significant severance packages, especially for senior executives or large-scale redundancy programmes

• Employment Details: Gather accurate information about salary, benefits, notice period, and length of service
• Exit Terms: Calculate severance payment, garden leave requirements, and any continuing benefits
• Compliance Check: Review existing employment contract and staff handbook for relevant policies
• Key Dates: Set clear termination date, payment schedule, and deadline for accepting the agreement
• Protection Needs: List confidential information, client relationships, and intellectual property to protect
• Document Generation: Use our platform to create a legally-sound agreement that includes all required elements

• Party Details: Full legal names, addresses, and roles of employer and employee
• Payment Terms: Precise severance amount, payment schedule, tax treatment, and benefits continuation
• Legal Waivers: Specific claims being settled under Section 43 Employment Rights Act 1996
• Confidentiality Obligations: Clear scope of confidential information and duration of restrictions
• Return of Property: List of company items to be returned and deadline for return
• Independent Legal Advice: Confirmation that employee received advice from a qualified solicitor
• Execution Requirements: Signature blocks, witness provisions, and date fields

A Severance Agreement differs significantly from a Business Acquisition Agreement in both purpose and scope, though both involve significant financial transactions and changes in business relationships.

• Primary Purpose: Severance Agreements handle employment termination and related benefits, while Business Acquisition Agreements manage the complete transfer of business ownership or assets
• Parties Involved: Severance Agreements are between employer and employee, whereas Business Acquisition Agreements involve business entities as buyer and seller
• Legal Requirements: Severance Agreements must meet specific employment law criteria and include independent legal advice, while Business Acquisition Agreements focus on commercial law compliance
• Duration and Scope: Severance Agreements typically conclude with final payments, but Business Acquisition Agreements often include ongoing warranties and indemnities