Severance Package

What is a Severance Package?

A severance package is the full set of terms offered to a departing employee, which typically includes severance pay alongside non-cash elements like benefits continuation, outplacement support, and a signed agreement releasing legal claims against the employer. The package is the whole agreement; the pay is just one line item within it.

What Non-Cash Components Does a Severance Package Typically Include?

Beyond the check itself, a package can bundle several distinct elements together.

Component	What It Covers	Why It Matters
Benefits continuation	Employer-subsidized COBRA premiums for a set period	Bridges a gap in health coverage
Outplacement services	Career coaching, resume help, job search support	Speeds re-employment, protects employer brand
Equipment and references	Keeping a laptop or phone, agreed reference language	Practical and reputational value beyond cash
Confidentiality and non-disparagement	Restrictions on discussing terms or criticizing the employer	Protects both parties' interests post-departure

Employer-paid COBRA subsidies are one of the most commonly negotiated non-cash items, since continuous health coverage matters immediately, while cash severance can sometimes be stretched or supplemented from other sources.

What is a Release of Claims?

In exchange for severance, employers almost always require the employee to sign a release waiving their right to sue over the termination, covering claims like discrimination, wrongful termination, or retaliation. Forbes notes that this release is typically the single most important document in the entire package, and reviewing it carefully, ideally with legal counsel, matters more than negotiating the dollar amount alone.

Not every claim can be waived. Wage and hour claims for unpaid overtime generally can't be released through a severance agreement, though an employer can ask the employee to acknowledge they aren't aware of any unpaid wages owed, which can still affect their credibility if a dispute arises later.

What are the OWBPA Review and Revocation Requirements?

For employees 40 or older, the Older Workers Benefit Protection Act adds specific procedural protections before an age discrimination waiver is enforceable. SHRM explains that an employee facing an individual layoff gets 21 days to review the agreement, while a group layoff of two or more employees extends that window to 45 days, and either way, the employee retains 7 days to revoke the agreement even after signing it.

Group layoffs carry an additional disclosure requirement: employers must share the job titles and ages of everyone included in and excluded from the layoff, giving affected employees the information needed to spot a potential pattern of age discrimination before deciding whether to sign.

What's Different About an Executive Severance Package?

Senior-level packages typically extend well beyond a standard formula. Indeed notes that executive packages often address equity acceleration, extended benefits, and other terms individually negotiated rather than pulled from a standard policy, frequently because the terms were partially set at hiring rather than decided only at departure.

Because executive exits carry outsized reputational and legal stakes, documenting the process consistently within broader HR compliance practices, rather than handling each departure ad hoc, reduces both legal exposure and the perception of unequal treatment. This is distinct from a retention bonus arrangement, which addresses the opposite problem: keeping someone rather than structuring their exit. Coordinating severance terms through a structured offboarding process also helps prevent the kind of inconsistency that can later look like turnover was handled unfairly across similar roles.

Discover how our HR solutions streamline onboarding, boost employee engagement, and simplify HR management

Book Your Free Demo

Frequently Asked Questions

Q: What is a release of claims in a severance package?

A: It's a legal document where the departing employee agrees not to sue the employer over their termination, in exchange for the severance being offered.

Q: How long do I have to review a severance agreement if I'm over 40?

A: Under the OWBPA, you generally get 21 days to review an individual severance agreement, or 45 days if it's part of a group layoff of two or more employees.

Q: Can I change my mind after signing a severance agreement?

A: Yes, if you're 40 or older and waiving age discrimination claims. You have 7 days after signing to revoke the agreement under the OWBPA.

Q: Can a severance agreement waive my right to unpaid overtime?

A: Generally no. Wage and hour claims typically can't be released through a severance agreement, even though other claims like discrimination can be.

Q: What makes an executive severance package different?

A: Executive packages often involve individually negotiated terms like equity acceleration and extended benefits, frequently set partly during hiring rather than only at departure.