Offering a Termination Agreement: Procedure for Employers

Offering a termination agreement: Procedure for employers

A termination agreement can be a sensible option for employers to end an employment relationship amicably. Especially in the context of restructuring or voluntary redundancy programs, it offers more flexibility than a unilateral dismissal – but requires careful preparation.

Because a good offer consists of more than just a severance package. The crucial factor is the interplay between the target group, the terms and conditions, communication, and a clear process. Employees should be able to make an informed decision, while the company simultaneously retains planning security.

Before making an offer, clarify: Who exactly do we want to reach?

Before a company offers a termination agreement, it should be clear which positions or functions are actually to be reduced .

Especially during large-scale staff reductions, a broad outreach strategy is risky. Particularly mobile employees and those in high demand on the job market might accept an attractive offer, even though the company actually wants to retain them.

Therefore, the selection should be based on the future organization: Which roles will be eliminated? Which skills will still be needed? And for which employee groups is a voluntary separation even sensible?

Volunteer programs can also employ the principle of double voluntariness . In this case, an agreement is only reached if both the employee and the employer consent. This can protect key roles, but should not replace a careful selection of the target group.

Prepare the offer completely before the meeting.

A common mistake is to develop key conditions only during discussions or to subsequently make multiple revisions.

It is better to prepare the termination agreement, including the severance pay calculation and any additional benefits, in advance and have it legally reviewed. This allows for consistent handling of similar cases and faster answers to any questions.

In addition to severance pay, other components may be relevant depending on the program, such as a defined departure date, time off, or support with career reorientation.

The simpler and more comprehensible the package is structured, the easier it is for employees to assess what the offer means for their personal situation.

Conduct the conversation clearly and respectfully.

Even a financially attractive offer can fail if the communication is ambiguous or contradictory.

Employers should therefore determine in advance who will conduct the conversation, what messages will be conveyed, and what questions to expect. Managers and HR should use the same information and avoid creating conflicting expectations.

In the conversation itself, clarity is more helpful than excessive euphemism. Employees want to understand why they are being offered the deal, what the conditions are, and what the next steps will be.

It is particularly important not to exert undue pressure. A termination agreement is a far-reaching decision. Employees therefore need the opportunity to carefully consider the offer.

Plan for a reasonable decision-making period.

Deadlines that are too short can create the impression that the signature is being forced. Conversely, very long deadlines increase uncertainty for both parties.

For larger volunteer programs, a clear decision-making period should therefore be defined from the outset. In the underlying benchmark survey, many companies used several weeks for this purpose.

What matters is not so much a rigid number as the balance: employees need enough time to make an informed decision, while at the same time the company needs a reliable timetable for further restructuring.

Not just explain the severance payment, but the perspective

For many affected individuals, the most important question is not simply: "How high is my severance payment?"

Equally important is: What happens next?

How good are my chances on the job market? Which positions are suitable? How long might the job search take? Is a career change even worthwhile for me right now?

Presenting employees with only a financial offer and leaving them to grapple with these questions alone increases uncertainty. The proposal therefore emphasizes career counseling and outplacement as crucial support during the decision-making phase.

Independent advice can help evaluate the offer in the context of one's personal professional situation. The aim should not be to persuade employees to sign, but to provide them with a better basis for making a decision.

For larger programs, control the process centrally.

Those offering only a single termination agreement can organize many things individually. This is no longer possible with a larger voluntary redundancy program or staff reduction program.

Then it must be clear at all times who has already been contacted, who has received an offer, which decisions are still pending, and how many agreements have been concluded.

Responsibilities should also be clearly defined: Who is authorized to agree to terms and conditions? Who decides on exceptions? Who answers questions after the meeting?

Especially differing special regulations or delayed documents can quickly create doubts about the fairness of the entire program.

Examine the legal framework early on.

Termination agreements offer room for maneuver, but are not a legal vacuum.

Particularly in the case of larger staff reductions, the participation rights of the works council and other labor law requirements may become relevant. The document points out, for example, that employer-initiated termination agreements must, under certain conditions, also be considered in connection with the regulations on mass redundancies.

Therefore, companies should involve labor law expertise as early as the conception stage – and not only after the first offers have been made.

Conclusion: A good severance offer requires more than just a severance payment.

Employers who wish to offer a termination agreement should not reduce the process to the amount of severance pay.

Successful agreements begin with a clearly defined target group, understandable and well-prepared terms and conditions, and consistent communication. A realistic decision-making timeframe and support for the professional prospects of those affected are also essential.

Especially in larger restructurings, a professionally designed process can help to enable voluntary solutions while maintaining trust and predictability.

Restart Career supports companies with perspective and outplacement consulting to provide employees with guidance for their next career step during and after a termination offer.

Note: The specific wording of termination agreements should always be reviewed under labor law.