A severance agreement refers to a legally binding document which enumerates the rights and responsibilities of both parties when the employment is terminated. The major clauses in a severance agreement specify the pay and other benefits that the employer will be eligible for, as well as the terms and conditions under which they will gain such benefits.
One of the common elements of a severance package is the amount of severance pay the employee will get, usually depending on the notice they get when terminated or when they choose to resign. Typically, the amount is not static, but is calculated using a variety of variables including the length of time the individual has worked with the company. In case of resignation, it is usually necessary for the employee to provide due notice of doing so in order to access the full severance package.
Some firms provide extended benefits including health insurance to ex-employees for a specified amount of time after resignation. The details of such benefits are also included in the severance package. Some firms will offer lifetime health insurance, while others will provide the benefits for a limited amount of time. The criteria that have to be fulfilled for an individual to benefit from this is also specified in the severance agreement.
Typically, severance agreements are usually offered as part of the job agreement, rather than at the end of employment. However, they can also be offered at the end of employment, as in cases where companies decide to lay off employees.