Severance Package Checklist: Everything to Review Before You Sign (2026)

A severance agreement is a legally binding contract: once signed (and any applicable revocation window passed), its terms control, and in most cases the release means the termination can no longer be challenged. Yet most people spend less than an hour with a document that affects their finances, career, and legal rights for years.

This checklist covers the components of a standard severance agreement: the items worth working through line by line before signing anything. The severance calculator benchmarks the cash component against typical ranges for your industry, role, and tenure (illustrative estimates), and the package evaluation guide covers how to read an offer against the benchmarks. This is educational information, not legal advice.

The Short Answer

Seven core components cover most of what matters in review: (1) cash amount and payment structure, (2) health insurance / COBRA continuation, (3) bonus and commission proration, (4) equity vesting treatment, (5) accrued PTO payout, (6) the release of claims and its scope, and (7) post-employment restrictions (non-compete, non-solicit, non-disparagement).

Timing frames everything: where the OWBPA applies (workers 40 or older, employers with 20+ employees, and a release waiving age-discrimination claims), the agreement must allow at least 21 days to review (45 in a group layoff) plus a 7-day revocation window after signing. Outside those conditions, the agreement's own deadline controls, and many people ask for more time when one feels short.

The rest of this post walks each component in detail, with the specific items to check and the questions people commonly raise when something looks off.

Cash Severance Pay

This is the most visible component of your package, but the details matter as much as the headline number.

What to Check

• Total amount. Calculate the gross (pre-tax) payment and compare it to industry benchmarks. The standard range is 1 to 4 weeks of base salary per year of service, though this varies significantly by industry and seniority level.
• Payment structure. Will you receive a lump sum or salary continuation (paid on your normal payroll schedule)? Lump sum gives you immediate access to the full amount. Salary continuation keeps you technically on payroll, which may affect benefits eligibility.
• Payment timing. When does the first payment arrive? Many agreements specify a waiting period of 7 to 14 days after signing, plus the 7-day revocation period required under the Older Workers Benefit Protection Act (OWBPA) for employees 40 and older.
• Prorated bonus. If you are being terminated before your annual bonus payout, does the agreement include a prorated bonus for the portion of the performance period you worked? If not, this is a high-value negotiation item.
• Commissions and draw. For sales roles, verify that all earned commissions and draws are paid out. In many states, earned commissions are classified as wages and must be paid regardless of the severance agreement.
• Accrued PTO payout. Check whether accrued, unused vacation or PTO is included in the severance calculation or paid separately. In states with mandatory PTO payout laws, this amount is owed to you regardless of the agreement.

Health Insurance and Benefits Continuation

Healthcare is often the second most valuable component of a severance package, especially for employees with families.

What to Check

• COBRA coverage period. Under the Consolidated Omnibus Budget Reconciliation Act, you have the right to continue your employer-sponsored health insurance for up to 18 months, but at full cost (employer and employee portions) plus a 2% administrative fee. Ask whether your employer will subsidize COBRA premiums and for how long.
• Employer-paid COBRA duration. The typical range in negotiated packages is 3 to 6 months of fully employer-paid COBRA. Premium COBRA for a family plan can cost $2,000 to $2,500 per month, so this benefit has substantial monetary value.
• Dental and vision. Confirm whether dental and vision coverage is included in the COBRA continuation or if it terminates separately.
• Life and disability insurance. Employer-provided life insurance and long-term disability coverage typically terminate on your last day of employment. Check whether you have the option to convert these policies to individual coverage.
• HSA and FSA balances. Health Savings Account balances are yours to keep. Flexible Spending Account balances, however, typically must be used before your coverage termination date. Plan accordingly.
• Employee Assistance Program (EAP). Some employers extend EAP access for a period after termination. This can provide free counseling, legal consultations, and financial planning services during your transition.

Equity and Stock Compensation

For employees with equity-based compensation, this section can represent the largest financial component of the severance package.

What to Check

• Unvested RSU treatment. Will unvested restricted stock units be forfeited, or will the employer provide accelerated vesting for the next tranche? Even partial acceleration can be worth tens of thousands of dollars.
• Stock option exercise period. Standard stock option agreements give 90 days after termination to exercise vested options. An extended 6-to-12-month window is a commonly negotiated item; it buys time to arrange financing and evaluate market conditions.
• ESPP enrollment. If you participate in an Employee Stock Purchase Plan, check whether your current enrollment period contributions will be used for a purchase or returned to you.
• Performance share adjustments. Long-term incentive plans based on multi-year performance periods should be prorated for the portion of the cycle you worked.

Non-Compete and Restrictive Covenants

These clauses restrict your post-employment activities and can have the greatest long-term impact on your career and earning potential. Review our detailed guide to non-compete clauses for a full analysis.

What to Check

• Non-compete scope. What activities, industries, and companies are restricted? Is the definition of "competitor" reasonable and specific, or is it so broad that it encompasses most employers in your field?
• Non-compete duration. How long does the restriction last? Durations beyond 12 months draw the closest review, and courts in many states have declined to enforce restrictions beyond 24 months. Enforceability is state-specific and for counsel to assess.
• Geographic limitations. Is the restriction limited to your market, or is it nationwide or global? Broader restrictions are harder to enforce but more damaging if upheld.
• Non-solicitation of clients. This clause restricts soliciting the former employer's clients. Enforceability varies more than most people expect: many states enforce reasonably drawn client non-solicits, while California treats most as void under Business & Professions Code §16600 (with narrow trade-secret-related exceptions). The specific wording and the state are what control here, a question for counsel where it matters.
• Non-solicitation of employees. This prevents you from recruiting former colleagues. Check whether it applies to all employees or only those you supervised or worked with directly.
• Non-disparagement. This clause restricts you from making negative public statements about the company. Ensure it is mutual (the company also agrees not to disparage you) and that it does not prevent you from filing government complaints or participating in investigations.
• State enforceability. Non-competes are unenforceable in California, Minnesota, North Dakota, and Oklahoma, and heavily restricted in many other states. Know your state's rules.

Release of Claims

The release is the core of the agreement from the employer's perspective. In exchange for severance, you waive your right to sue the company.

What to Check

• Scope of the release. What claims are you waiving? Most releases cover all known and unknown claims arising from your employment. Understand what rights you are giving up, including potential discrimination, harassment, retaliation, and wage claims.
• Carve-outs. Federal law prohibits releasing certain claims, including the right to file a charge with the EEOC, workers' compensation claims, unemployment insurance benefits, and vested ERISA benefits (such as 401k balances). Confirm these carve-outs are present.
• OWBPA compliance. If you are 40 or older, the Older Workers Benefit Protection Act requires that the agreement specifically reference the Age Discrimination in Employment Act (ADEA), give you at least 21 days to consider the agreement (45 days in a group layoff), and provide a 7-day revocation period after signing. If these requirements are not met, the age discrimination waiver is invalid. See our guide for workers 40 or older.
• Mutual release. Ask whether the company will also release claims against you. This protects you from the employer later pursuing clawback actions or alleging misconduct.

Reference and Departure Terms

How your departure is characterized can affect your job search for months.

What to Check

• Agreed-upon departure narrative. Will the company characterize your departure as a layoff, a mutual separation, or a termination? The language used in reference checks and internal announcements matters.
• Reference letter. Request a written reference letter from your direct manager or a senior leader. Having this in hand eliminates the risk of future reference problems.
• Reference policy. Will the company confirm only dates of employment and title, or will they provide substantive references? Get the specific contact person and phone number designated for reference calls.
• Internal communications. What will the company tell your colleagues about your departure? Ask to review and approve the internal announcement.

Outplacement Services

Outplacement is professional career transition support provided at the employer's expense.

What to Check

• Service tier. Outplacement packages range from basic (online tools and group workshops, worth $1,000 to $2,000) to executive-level (one-on-one coaching, resume writing, and interview preparation, worth $5,000 to $15,000). If your agreement includes outplacement, confirm which tier you are receiving.
• Duration of access. How long will you have access to outplacement services? Three months is standard for basic packages. Six to twelve months is typical for executive packages.
• Provider quality. Research the outplacement firm. Ask if you can choose your own provider or if you are locked into the company's vendor.
• Cash alternative. If you do not want outplacement services, ask if the employer will provide the equivalent value as a cash payment.

Cooperation and Litigation Clauses

These clauses create ongoing obligations that extend well beyond your last day.

What to Check

• Cooperation clause. This requires you to cooperate with the company in future litigation, investigations, or audits. Ensure it includes a provision for reasonable scheduling and reimbursement of your expenses, including legal fees if you need independent counsel.
• No-rehire clause. Some agreements state that you will not apply for or accept future employment with the company. If you might want to return, negotiate removal or a time limit.
• Clawback provisions. Check whether the agreement includes provisions that allow the company to recover severance payments if certain conditions are violated. Understand exactly what triggers a clawback.

Timing and Process

What to Check

• Consideration period. Where the OWBPA's conditions apply (40+, employers with 20+ employees, age-claim releases), at least 21 days of review time is required (45 in a group layoff). Outside those conditions the agreement's deadline controls; pressure to sign unusually fast is a red flag worth pausing on.
• Revocation period. Under the same OWBPA conditions, a 7-day revocation period after signing applies and cannot be waived.
• Effective date. When does the agreement become binding? Typically it is the day after the revocation period expires.
• Last day of employment. Confirm your official termination date, as this affects benefits eligibility, equity vesting, and service year calculations.

A Pre-Signing Sequence Many People Follow

1. Benchmark the package with the severance calculator, an illustrative estimate of where the offer sits against typical ranges, not a final figure.
2. Work through this checklist and note anything missing, unfavorable, or unclear.
3. Prioritise: the 2 to 3 items with the greatest financial or career impact usually get the attention in any discussion.
4. Legal review: for agreements with a release of claims, significant equity, a non-compete, or a large sum at stake, many people have a licensed employment attorney in their state review the document; only counsel can assess how its terms apply to you.
5. Requests in writing: a professional email creates a clear record; the negotiation email templates show the tone and structure people commonly adapt.
6. The full review period exists to be used: signing timing is your decision, and urgency alone is rarely a reason to compress it.

A severance agreement is one of the more consequential documents most people ever sign; this checklist is the diligence framework. The judgment calls remain yours, ideally with professional advice where the stakes warrant it.

Two companion reads: how long you have to sign, and what the OWBPA windows require, and, if a sign-on bonus is being clawed back, what repayment clauses commonly say.