Checking a termination agreement: what it must contain and what you should look out for

What must be included in a termination agreement?

A termination agreement must clearly set out all the key points. These include, in particular:

• The date of termination of the employment relationship
• The amount of the severance payment and the date of payment
• Arrangements regarding remaining holiday entitlement and overtime
• Agreement on leave of absence
• Content and rating of the reference
• Handling of bonuses, commissions or special payments 

Each of these points determines your financial entitlements and your future situation. If provisions are missing or unclear, this creates room for interpretation – and in practice, this usually works to your disadvantage.

If you sign a termination agreement without checking it

Generally speaking: no. A signature may be acceptable if:

• the contract is complete and clearly worded
• the severance pay is proportionate to the situation
• there are no risks regarding unemployment benefit
• you fully understand the consequences 

You should not sign if:

• individual points are unclear or unresolved
• the employer is putting pressure on you
• you cannot assess the implications with certainty
• there is a risk of a waiting period for unemployment benefit 

Signing without having the agreement reviewed by a solicitor specialising in termination agreements often leads to you losing your entitlements without realising it.

You should check these points particularly carefully

Not every termination agreement is fair. Employers often draft contracts in such a way as to minimise their own risk. Pay particular attention to the following points:

• When exactly does your employment end, and does this date suit your situation?
• How much is the severance payment and when will it actually be paid?
• Whether the agreement could result in a waiting period for your unemployment benefits
• Whether you have to work until the end of the contract or will be on paid leave
• Whether, by signing, you are waiving further entitlements 

Settlement clauses in particular often result in you waiving entitlements to which you are actually entitled.

Common pitfalls in termination agreements

In practice, the same problems crop up time and again:

• Severance pay is not clearly defined or is lower than it could be
• Wording regarding termination leads to disadvantages regarding unemployment benefit
• Important entitlements are excluded by clauses
• Deadlines put you under pressure
• The first draft of the contract is accepted without being checked 

The first draft of a termination agreement almost always reflects the employer’s interests. Not yours. If you accept it without checking it, you automatically accept these terms, which may be disadvantageous to you.

How to improve your position in practical terms

You have more influence than many employees realise. These steps will strengthen your position:

• Make a point of taking your time to review the contract
• You do not sign under pressure
• You scrutinise every clause
• You explore alternatives, such as resigning
• You actively renegotiate 

The key point is: you do not accept the contract as a fait accompli, but as a basis for negotiation. Our employment lawyers will help you identify the right points and renegotiate them effectively.

When you should have a termination agreement checked

You should have the contract checked if:

• you are presented with a termination agreement
• the employer is pressing for a quick decision
• a severance payment is to be agreed
• you are unable to fully assess the implications
• there are ambiguities in the contract 

Our employment lawyers will analyse your contract in detail and advise you on which amendments are advisable.