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  4.  » Severance agreements, Part-2: The employer’s perspective

Severance agreements, Part-2: The employer’s perspective

A severance package is usually the final step in the separation process for and employer and its employee. The previous blog post discussed an employee’s perspective when it comes to severance agreements while this blog post will look at the employer’s perspective.

As mentioned in the previous blog post, a severance package usually covers three important points: the monetary settlement amount, the non-competition clause and the protection of trade secrets. Let us now look at these three things from an employer’s perspective.

Monetary package

When an employer has to discharge or lay off an employee, the first thing that the employer needs to target is “peace of mind” so as to mitigate the risk of being sued by the former employee for some event from the past. The employer needs to make an offer that can “buy” this peace. At the same time, the employer should not make an offer that is above and beyond what should have been paid rightfully.


The prosperity of an organization’s business is largely dependent on the competition it faces in the market from its rivals. Therefore, it may be necessary for an employer to ensure that a former employee does not compete against is business. Courts, however, can be skeptical about some “unreasonable” non-compete clauses but may allow employers to include clauses that can be called “reasonable.”

Trade secrets

It probably goes without saying that trade secrets are often the mantra based on which a business flourishes and sustains itself. Therefore, protecting trade secrets through the severance agreement is another important task for employers at the time of discharging or laying off employees. As mentioned earlier, this is usually done by setting a pre-decided amount that a former employee has to pay in the event that he or she discloses a trade secret that can hurt the prospects of the former employer.

Negotiating a severance package with an employee

Severance negotiations with an employee can often be a distraction for a business. Moreover, business owners may not always be aware of the various laws that protect employees in the event of severance. Therefore, it may be a wise decision to proactively seek professional help if an employer is already in the process of or planning to discharge or lay off an employee. To understand severance packages in further detail, employers may wish to visit our webpage that is dedicated to this topic.