Legal Templates
Layoff Severance Agreement

Layoff Severance Agreement Template for India

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Key Requirements PROMPT example:

Layoff Severance Agreement

"I need a Layoff Severance Agreement for our Mumbai-based IT company that's reducing its workforce by 50 employees in March 2025, including provisions for outplacement services and accelerated vesting of stock options."

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What is a Layoff Severance Agreement?

The Layoff Severance Agreement is a crucial document used in India when companies need to implement workforce reductions while ensuring legal compliance and fair treatment of employees. It becomes necessary during organizational restructuring, economic downturns, or strategic realignment of business operations. The document must strictly adhere to Indian labor laws, including the Industrial Disputes Act, 1947, state-specific Shop and Establishment Acts, and other relevant employment legislation. This agreement typically includes comprehensive details about severance compensation, statutory benefits, continuation of certain benefits, release of claims, and post-employment obligations. It serves as a legally binding document that protects both employer and employee interests while ensuring transparent communication of separation terms and conditions.

What sections should be included in a Layoff Severance Agreement?

1. Parties: Identification of the employer and employee, including full legal names, addresses, and designation

2. Background: Brief context of employment history, reason for layoff, and basis for the agreement

3. Definitions: Key terms used throughout the agreement including 'Effective Date', 'Severance Payment', 'Release Period', etc.

4. Separation Date: Clear specification of the last day of employment and handover responsibilities

5. Severance Payment: Detailed breakdown of severance amount, calculation method, payment schedule, and tax implications

6. Statutory Benefits: Details of gratuity, provident fund, earned leave encashment, and other statutory dues

7. Release of Claims: Mutual release of claims and legal rights between parties

8. Confidentiality Obligations: Ongoing obligations regarding company confidential information

9. Company Property: Requirements for return of company property and data

10. References: Agreement on how employment references will be handled

11. Governing Law: Specification of Indian law as governing law and jurisdiction

12. Entire Agreement: Statement that this document represents the complete agreement between parties

What sections are optional to include in a Layoff Severance Agreement?

1. Outplacement Services: Details of any career transition support provided by the company

2. Non-Compete Clause: Include only if legally enforceable and reasonable in scope as per Indian law

3. Continuation of Benefits: Any extension of medical insurance or other benefits beyond separation

4. Equity/Stock Options: Treatment of outstanding stock options or equity, if applicable

5. Re-employment Rights: Any provisions regarding potential future re-employment

6. Legal Consultation: Acknowledgment of right to seek legal counsel and time provided for review

7. Dispute Resolution: Optional arbitration or mediation clauses for dispute resolution

8. Non-Disparagement: Mutual agreements regarding post-employment communications

What schedules should be included in a Layoff Severance Agreement?

1. Schedule A - Severance Calculation: Detailed calculation of severance amount including years of service, salary components, and statutory formulae

2. Schedule B - Benefits Summary: Comprehensive list of benefits and their treatment post-separation

3. Schedule C - Company Property Checklist: List of company assets to be returned

4. Schedule D - Release of Claims: Detailed release of claims form as per Indian legal requirements

5. Appendix 1 - Payment Timeline: Schedule of severance and statutory payment dates

6. Appendix 2 - Statutory Compliance Checklist: Checklist ensuring compliance with all applicable Indian labor laws

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Company
Employee
Effective Date
Separation Date
Notice Period
Severance Payment
Statutory Benefits
Gratuity
Provident Fund
Confidential Information
Company Property
Intellectual Property Rights
Release of Claims
Full and Final Settlement
Cause
Accrued Benefits
Basic Salary
Gross Salary
Outstanding Dues
Leave Encashment
Benefits
Bonus
Variable Pay
Stock Options
Restrictive Covenants
Governing Law
Jurisdiction
Confidentiality Obligations
Non-Compete Period
Non-Solicitation
Reemployment Rights
Settlement Period
Tax Deduction
Working Day
Severance Period
Outplacement Services
Legal Representatives
Dispute
Force Majeure
Relevant Industries

Information Technology

Manufacturing

Financial Services

Telecommunications

Retail

Healthcare

Professional Services

Education

Media and Entertainment

Real Estate

Construction

Automotive

Pharmaceutical

E-commerce

Relevant Teams

Human Resources

Legal

Finance

Operations

Information Technology

Administration

Compliance

Corporate Affairs

Employee Relations

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Human Resources Director

Legal Counsel

Department Manager

Project Manager

Software Engineer

Financial Analyst

Marketing Manager

Operations Manager

Research Scientist

Sales Executive

Administrative Officer

Production Supervisor

Quality Assurance Manager

Industries
Industrial Disputes Act, 1947: Primary legislation governing layoffs, retrenchment, and compensation. Requires companies with 100+ workers to seek government permission for layoffs. Mandates minimum severance of 15 days' average pay for each completed year of continuous service.
Payment of Gratuity Act, 1972: Mandates gratuity payment for employees who have completed 5 years of continuous service. Calculated at 15 days' wages for each completed year of service.
Income Tax Act, 1961 (Section 10): Governs the taxation of severance packages and retirement benefits. Provides for tax exemptions on certain components of the severance package up to specified limits.
Employees' Provident Funds and Miscellaneous Provisions Act, 1952: Regulates the settlement of provident fund accounts upon termination and the transfer or withdrawal of accumulated funds.
State-specific Shops and Establishments Acts: Local state laws governing employment terms, notice periods, and termination conditions for establishments within their jurisdiction.
Contract Labour (Regulation and Abolition) Act, 1970: Relevant for contract employees being laid off, ensuring proper termination and compensation procedures.
Employment Standing Orders Act, 1946: Defines conditions of employment including termination procedures for industrial establishments with 100+ workers.
Companies Act, 2013: Contains provisions regarding corporate restructuring, winding up, and treatment of employees during such events.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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