What to Expect in a Severance Agreement (and How to Handle It the Smart Way)

Layoffs are tough, even when you see them coming. A severance agreement can feel intimidating, but understanding it helps you protect your finances, your rights, and your next move.

It looks formal, maybe even intimidating. Here is the truth: this document is not meant to trick you, it is meant to finalize the terms of your departure. Knowing what is inside it can help you protect yourself, your finances, and your future job opportunities.

1. What Is a Severance Agreement, Really?

A severance agreement, sometimes called a separation or termination agreement, is a contract between you and your employer that outlines what you will receive when you leave, usually after a layoff or restructuring.

At its core, it is an exchange:

• The company offers compensation such as severance pay and continued benefits.
• You agree to conditions such as not suing the company or disclosing internal information.

Most companies offer severance to soften the transition and reduce risk. It is not required by law in most states, but it is often standard policy at larger firms.

2. What Is Typically Included in a Severance Package

• Severance pay. Commonly 1 to 2 weeks of pay per year of service, though it varies. Senior or long tenured employees may receive more.
• Health insurance coverage. Some companies subsidize COBRA for a set period.
• Unused PTO or vacation pay. Many states require payout, confirm it is spelled out in writing.
• Outplacement support. Coaching, job search help, or resume services. Use it if offered.
• Confidentiality and non disparagement. Read carefully, terms can be broader than expected.
• Release of claims. You waive the right to sue in exchange for payment and benefits.

3. Before You Sign, Pause and Review

• Read every line. Pay special attention to the release of claims, non compete, non solicit, and confidentiality sections.
• Ask HR for plain language explanations where needed.
• Consider a one hour review with an employment attorney, especially if restrictive covenants are included.

Being thorough is not being difficult, it is being smart.

4. Can You Negotiate Your Severance Agreement?

Often, yes, especially with longer tenure or critical roles. Stay professional and focus on clear requests:

• Additional weeks of severance pay.
• Extended subsidized health coverage.
• Positive reference or departure language.
• Outplacement or coaching support.

Sample wording you can adapt:

“I appreciate the offer and support. Based on my tenure and contributions, is there flexibility on the severance amount or COBRA coverage duration?”

5. Key Takeaways

• Do not rush. Use the review window you are given.
• Severance terms can be negotiable within reason.
• Watch for clauses that affect your next job, including non compete and non disparagement.
• Consider a quick legal review to protect your interests.

You worked hard for this. Leave on fair, clear terms.

Final Thoughts

If you have been laid off, remember: you are not your job. A severance agreement is not the end of your story, it is a bridge to what is next. Use this moment to pause, reflect, and set yourself up for your next opportunity.

If you are still in the review period, take a breath. You have time. Read carefully, ask questions, and advocate for yourself. You earned that right.