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How do I Write a Severance Letter?

By David Larson
Updated May 16, 2024
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Writing a good severance letter requires that you remember your obligations to yourself or your company, to your employee, and to labor laws. Reviewing your company policy on non-compete agreements, non-disclosure, severance pay, and any union contracts that come in to play is an important step before sitting down to write a severance letter. Be sure to avoid any possibly discriminatory language referring to age, gender, race, and sexual orientation. The nature of the employee’s job and the reasons for the severance will have an impact on the tone and language of your severance letter; for example, a letter releasing a seasonal employee is less complex than a severance letter to a long-term permanent employee. Your letter should include all specific data related to the separation, such as the effective date of termination, reasons for separation, and any details regarding insurance and severance pay.

Responsibilities to yourself and your company include protecting your business from legal action for wrongful termination and, at the same time, maintaining positive employee morale. Your soon-to-be ex-employee is likely to have friends among your remaining staff. Assuming the severance is benign — such as employee layoffs for economic reasons — making the effort to reassure the ex-employee and offer a positive letter of reference can defuse animosity that could reflect back on your staff morale. Be as kind as you can while being very clear about details.

For permanent employees, issues such as severance pay, vacation time, sick time, stock options, and insurance coverage need to be addressed. As a matter of sound business policy, you might want to seek legal advice before writing the severance letter. In terms of severance pay, sick time, and vacation time, you can be specific without using actual dollar amounts.

Two weeks' vacation pay, nine days' sick time, or six months' severance pay are sufficiently detailed indications of compensation for your severance letter. Reference to action on stock options and retirement plans should be guided by your accountant and legal counsel. You might consider the letter a severance agreement. You are making an offer of terms of separation and, by signing the severance agreement, the employee about to leave employment agrees with your terms. In the event that the employee is a union member, the general union contract should include guidelines that must be followed in the event of a layoff or termination.

Do not include any language in your severance letter that references gender, age, race, sexual orientation, or any other issue that could be considered discriminatory. The National Labor Relations Board (NLRB) has severance guidelines available online. Do not be shy about seeking legal counsel. Be clear, concise, detailed and as kind as circumstances warrant, and your letter should accomplish your goal of a harmonious separation.

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