9 Essentials of a Good Termination Agreement
Imagine there is a reorganization at your workplace, your employer thinks you are underperforming, or there is a (latent) conflict. In such cases, your employer may offer you a termination agreement. What should a good departure agreement include?
The transition allowance is for everyone. It currently amounts to only one-third of a monthly salary per year of service, so you can do the math. It is also known as the ‘transition tip’. The transition allowance only applies if there is a valid ground for dismissal. If not, then there is no reason to talk about only the transition allowance. In that case, we need to discuss compensation that does justice to all the work you have done over the years.
There is also something called the fair compensation. This comes into play in cases of seriously culpable conduct by the employer. The fair compensation covers the damage you suffer due to your dismissal. In theory (and sometimes in practice), this amounts to your lost income until retirement. But usually, it concerns the difference in income if your employer had not dismissed you in a seriously culpable manner.
Variable pay comes in many forms. Think of profit-sharing, bonuses, commissions, certificates, shares, options, and share appreciation rights, or combinations thereof. Because of your dismissal, you may miss out on many payments and you are often expected to accept that as normal. It is not.
You should have your vacation days paid out. A vacation day is worth as much as a normal working day, and that is more than just salary and 8% holiday allowance. Being exempt from work is not a reason to take your vacation.
Many people think a non-compete clause is not very serious. That these clauses are not enforced or that the court always moderates or disregards them. This is a widespread misunderstanding. Although the concept of a non-compete clause may seem outdated, that does not make the risk of penalties any less real. So: get rid of that clause. Why accept restrictions if your employer wants to let you go?
You are dismissed, so you will probably start applying for jobs soon. For that, it helps to frame your dismissal positively, and it is useful to have a nice reference letter in which your ex-employer acknowledges your valuable contribution to the company.
You can negotiate yourself, but experience shows it is better to hand it over to an experienced professional. Especially because you are emotionally involved. It is advisable to have someone who can look at it rationally and has extensive experience in this area. Also to ensure you don’t shoot yourself in the foot. You can have your legal expenses insurance cover this, but why would you? You did not ask for the situation where you are dismissed, so it is logical that your employer pays the lawyer’s fees. That is also customary. Don’t wait too long to involve someone so you can brainstorm and avoid mistakes.
Even in a termination by mutual consent, the agreed or statutory notice period plays a role, namely as the start date for unemployment benefits under the Unemployment Insurance Act. Such benefits are nothing to be ashamed of; you have participated in this insurance and paid for it yourself.
Regret your departure agreement? You have at least a two-week statutory reflection period. By means of a registered letter to your employer, you can dissolve the agreement.