Free severance letter templates for small business: standard, layoff, mutual, executive, and no-release versions. Plain-language and attorney-safe. DOCX.
Five free severance letter templates for small business: a standard position-elimination letter, a layoff and RIF letter, a mutual separation letter, an executive and over-40 letter, and a no-release goodwill letter. Plain-language transmittal letters that point to an attorney-prepared agreement. Download as DOCX, no signup.
A severance letter tells a departing employee, in plain language, what severance you are offering: the pay, how final pay and PTO are handled, when benefits end and how COBRA works, and what to return. The key thing to understand is what it is not. A severance letter is a summary, a transmittal note, not the binding legal contract. The document the employee signs to give up legal claims in exchange for severance is the separate severance agreement, and that agreement carries serious legal weight, especially for employees 40 and older.
These five templates are transmittal letters, the part a small business can safely handle itself: a standard position-elimination letter, a layoff and RIF letter, a mutual separation letter, an executive and over-40 letter, and a no-release goodwill letter. Each downloads as a Word document, free and without an email, and each points to the attorney-prepared agreement rather than trying to be it. Because a separation is an offboarding event, this pairs with your offboarding checklists and offboarding best practices.
TL;DR
A severance letter is a plain-language summary of a severance package, written by the employer. It is not the binding contract: the separate severance agreement contains the release of claims and should be prepared by an attorney. Download five free letter templates as DOCX: standard, layoff, mutual, executive, and no-release. For employees 40 or older, strict federal rules govern the agreement, and overly broad confidentiality and non-disparagement clauses are restricted. This is general information, not legal advice.
What a Severance Letter Is
A severance letter is a written notice that summarizes the severance package an employer is offering a departing employee: severance pay, final pay and unused PTO, when benefits end and how COBRA continuation works, and what company property to return. It is a plain-language transmittal document, and it is a summary, not the binding legal contract.
It is an employer-side document, written by HR or, in a small business, the owner or a manager, and handed to the employee alongside the separate agreement. Its value is clear, humane communication of the offer. It sits within the broader offboarding process, alongside your offboarding emails and the employee exit process.
The Letter Is Not the Agreement
This is the single most important point on this page. A severance letter summarizes the package; the binding legal document is the separate severance agreement, which contains the release of claims and should be prepared by an attorney. Trying to make the letter serve as the agreement is where a small business takes on real legal risk, especially for an employee age 40 or older. Keep the letter simple and route the release to counsel. This is general information, not legal advice.
Severance Letter vs Severance Agreement
Because vendors often use the two terms interchangeably, it is worth drawing the line clearly. One is a communication; the other is a contract. Confusing them is how a small business ends up with a legally risky document it never meant to create.
The severance letter
A plain-language transmittal note
Summarizes the package
Written by the employer, sent to the employee
Not legally binding on its own
The severance agreement
The binding legal contract
Contains the release of claims
Requires the employee's signature
Should be prepared by an attorney
The letter is what you write and send. The agreement is what an attorney prepares and the employee signs. This page gives you strong, sendable letters and, deliberately, does not provide a release of claims, because a generic release is exactly the kind of high-stakes document that should be drafted for your situation, not copied from a template. For the broader context of reductions, the RIF overview explains how layoffs work.
What to Include
A severance letter covers four groups: the money, benefits and property, the legal pointer, and the close. The four groups below are what a clear transmittal letter contains, and, just as important, the release language is deliberately not among them.
The money
Severance pay amount and form
Final paycheck and unused PTO
Timing per state final-pay rules
Benefits and property
When health coverage ends
COBRA or state continuation
Company property to return
The legal pointer
Reference to the separate agreement
Note that the letter is a summary
Attorney-review recommendation
The close
Contact person for questions
Effective separation date
A respectful sign-off
Notice what is missing: the release of claims, the confidentiality and non-disparagement terms, and the age-waiver language. Those all live in the agreement, not the letter. The letter's job is to summarize and point; the agreement's job is to bind, and that is counsel's territory.
Which Template Should You Use?
Start with the standard letter for a routine single separation, the layoff version for a reduction in force, the mutual version for an amicable exit, the executive version when the employee is 40 or older or senior, and the no-release version for a simple goodwill payment.
Standard Severance Letter
Position elimination
The core transmittal letter: summarizes severance pay, final pay, benefits and COBRA, and property return, and points to the separate agreement. For a routine single separation.
Layoff / RIF Letter
Reduction in force
Adds the restructuring rationale and a note that a group layoff involving employees 40 or older triggers extra federal review and disclosure requirements handled in the agreement.
Mutual Separation Letter
Amicable exit
For a negotiated, good-terms departure. Warmer in tone, covers references, and still routes the binding release to a separate attorney-prepared agreement.
Executive / Over-40 Letter
Attorney review critical
The highest-stakes version. References the review and revocation periods and the written advice to consult counsel that federal law requires for employees 40 or older, without containing the release itself.
Letter Without a Release
Goodwill payment
A simple severance payment with no release of claims required. Useful for a small goodwill gesture, with a clear note that it does not waive any claims.
Match the Letter, but Always Route the Release to Counsel
A routine single exit: the Standard letter. A reduction in force: the Layoff and RIF letter. An amicable, negotiated departure: the Mutual Separation letter. An employee 40 or older, or an executive: the Executive letter, with the release handled by an attorney. A goodwill payment with no strings: the No-Release letter. In every case except the last, the binding release should be prepared by counsel; the letter only summarizes and points to it. This is general information, not legal advice.
5 Free Severance Letter Templates
Download all five as a single Word document or copy individual templates. Each is a transmittal letter that summarizes the package and points to the separate agreement; none contains a release of claims. Fill in your details, send the letter, and have counsel prepare the binding agreement where a release is involved.
Download All 5 Severance Letter Templates
A standard position-elimination letter, a layoff and RIF letter, a mutual separation letter, an executive and over-40 letter, and a no-release goodwill letter. All in one DOCX.
Template 1: Standard Severance Letter (Position Elimination)
The core transmittal letter: summarizes severance pay, final pay, benefits and COBRA, and property return, and points to the separate agreement. For a routine single separation.
Standard Severance Letter (Position Elimination)
[Company Name] Letterhead
[Date]
[Employee Name]
[Employee Address]
Dear [Employee Name],
This letter confirms the end of your employment with [Company Name], effective
[Separation Date], due to [the elimination of your position / a business
decision]. This letter summarizes the severance [Company Name] is offering. It
is not the binding agreement itself.
YOUR SEVERANCE PACKAGE
•Severance pay: [amount], paid as [lump sum / salary continuation over X weeks].
•Final pay: your final paycheck, including [unused PTO per policy and state
law], will be provided [per state final-pay rules].
•Benefits: your health coverage [ends on / continues through] [date]. You will
receive separate information about continuing coverage under COBRA [or state
continuation], and the deadline to elect it.
•Company property: please return [laptop, keys, badge, other property] by
[date].
IMPORTANT: THE SEVERANCE AGREEMENT
This severance is offered in exchange for your signing a separate severance
agreement, which includes a release of claims. That agreement is the binding
legal document; this letter is only a summary. Please review the agreement
carefully. [If the agreement asks you to waive any legal claims, we encourage
you to have an attorney review it before you sign.]
NEXT STEPS
Please contact [Name] at [phone / email] with any questions. We wish you well.
Sincerely,
[Name]
[Title], [Company Name]
DISCLAIMER: This is a sample transmittal letter for general information only and
is not legal advice, and it is not a severance agreement or release of claims.
Have a qualified employment attorney prepare the release, especially for any
employee age 40 or older.
Template 2: Layoff / RIF Severance Letter
Adds the restructuring rationale and a note that a group layoff involving employees 40 or older triggers extra federal review and disclosure requirements handled in the agreement.
Layoff / RIF Severance Letter
[Company Name] Letterhead
[Date]
[Employee Name]
[Employee Address]
Dear [Employee Name],
This letter confirms that your position at [Company Name] is being eliminated as
part of a [reduction in force / restructuring], effective [Separation Date].
This decision reflects [brief business rationale] and is not a reflection of
your performance. This letter summarizes the severance being offered; it is not
the binding agreement.
YOUR SEVERANCE PACKAGE
•Severance pay: [amount], paid as [lump sum / salary continuation].
•Final pay: including [unused PTO per policy and state law], provided [per state
For a negotiated, good-terms departure. Warmer in tone, covers references, and still routes the binding release to a separate attorney-prepared agreement.
Mutual Separation Severance Letter
[Company Name] Letterhead
[Date]
[Employee Name]
[Employee Address]
Dear [Employee Name],
This letter confirms our mutual agreement that your employment with [Company
Name] will end on [Separation Date]. We appreciate your contributions and are
parting on good terms. This letter summarizes the severance we are offering as
part of this transition; it is not the binding agreement.
YOUR SEVERANCE PACKAGE
•Severance pay: [amount], paid as [lump sum / salary continuation].
•Final pay: including [unused PTO per policy and state law].
•Benefits and COBRA: coverage details and continuation information to follow.
•References: [state your reference approach, if agreed].
•Company property: please return [items] by [date].
THE SEVERANCE AGREEMENT
This severance is offered in exchange for signing a separate severance agreement
that includes a release of claims. That document is the binding agreement; this
letter is a plain-language summary. We encourage you to review it carefully and,
if you wish, have an attorney review it before signing.
NEXT STEPS
Please reach out to [Name] at [phone / email] with any questions. We wish you
the best in your next chapter.
Sincerely,
[Name]
[Title], [Company Name]
DISCLAIMER: This is a sample transmittal letter for general information only and
is not legal advice, and it is not a severance agreement. Have a qualified
employment attorney prepare the release, especially for any employee age 40 or
older.
Template 4: Executive / Over-40 Severance Letter
The highest-stakes version. References the review and revocation periods and the written advice to consult counsel that federal law requires for employees 40 or older, without containing the release itself.
Executive / Over-40 Severance Letter (Attorney Review Critical)
[Company Name] Letterhead
[Date]
[Employee Name]
[Employee Address]
Dear [Employee Name],
This letter confirms the end of your employment with [Company Name], effective
[Separation Date], and summarizes the severance being offered. It is not the
binding agreement; the separate severance agreement is the legal document you
would sign.
YOUR SEVERANCE PACKAGE
•Severance pay: [amount], paid as [lump sum / salary continuation].
•Final pay: including [unused PTO per policy and state law].
•Benefits and COBRA: coverage and continuation details to follow.
•[Equity treatment, if applicable: describe vesting and exercise windows.]
•Company property: please return [items] by [date].
REVIEW PERIOD, REVOCATION, AND YOUR RIGHT TO COUNSEL
Because you are [age 40 or older / in a senior role], the severance agreement
includes protections required by federal law. The agreement itself will state
your consideration period to review the offer and a revocation period after you
sign, during which you may change your mind. We advise you in writing to consult
an attorney before accepting the agreement, and the severance will be paid only
after the revocation period passes without revocation.
[This letter intentionally does not contain the release language. The severance
agreement, prepared with counsel, contains the release and all required legal
provisions.]
NEXT STEPS
Please contact [Name] at [phone / email] with any questions.
Sincerely,
[Name]
[Title], [Company Name]
DISCLAIMER: This is a sample transmittal letter for general information only and
is not legal advice. Waivers of age-discrimination claims for employees age 40
or older carry strict federal requirements; have a qualified employment attorney
prepare the agreement and confirm the review and revocation periods.
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A simple severance payment with no release of claims required. Useful for a small goodwill gesture, with a clear note that it does not waive any claims.
Severance Letter Without a Release (Goodwill Payment)
[Company Name] Letterhead
[Date]
[Employee Name]
[Employee Address]
Dear [Employee Name],
This letter confirms the end of your employment with [Company Name], effective
[Separation Date]. As a goodwill gesture, [Company Name] is providing a severance
payment described below. This severance is [not conditioned on signing any
agreement / a simple payment with no release required].
YOUR SEVERANCE PAYMENT
•Severance pay: [amount], paid as [lump sum / salary continuation].
•Final pay: including [unused PTO per policy and state law], provided [per state
rules].
•Benefits and COBRA: coverage [ends / continues through] [date]; continuation
information to follow.
•Company property: please return [items] by [date].
NO RELEASE REQUIRED
This payment is offered without requiring you to sign a release of claims.
[Note: because there is no signed release, this payment does not waive any
potential claims. If your goal is to obtain a release in exchange for severance,
use a severance agreement prepared by an attorney instead of this letter.]
NEXT STEPS
Please contact [Name] at [phone / email] with any questions. We wish you well.
Sincerely,
[Name]
[Title], [Company Name]
DISCLAIMER: This is a sample transmittal letter for general information only and
is not legal advice. A severance payment without a release does not waive
employee claims; if you want a release, consult a qualified employment attorney.
The Legal Layer You Cannot Skip
A severance letter is simple, but the agreement it points to sits among the highest-risk HR documents there are. You do not need to become an expert, but you do need to know where the landmines are so you route the right parts to counsel. Four points cover most of the risk.
The letter is not the release, and that distinction protects you
The single most useful thing to understand about a severance letter is that it is not the binding legal document. A severance letter is a transmittal note: a plain-language summary of the package you are offering, written by the employer and handed to the departing employee. The binding document is the separate severance agreement, which contains the release of claims the employee signs to give up the right to sue. Keeping these two separate is not a technicality; it is what keeps a simple, sendable letter out of the legal minefield that a release lives in. Use the letter to communicate the offer clearly and warmly, and route the actual release to an attorney. A letter that tries to be the agreement is where small businesses get into trouble. This is general information, not legal advice.
Employees 40 and older trigger strict federal rules
If a departing employee is age 40 or older and you want them to release age-discrimination claims, federal law under the Older Workers Benefit Protection Act imposes strict requirements on the agreement, not the letter. The release must give the employee at least 21 days to consider the offer, or at least 45 days in a group layoff, plus a 7-day period after signing during which they can revoke. It must expressly name the Age Discrimination in Employment Act, advise the employee in writing to consult an attorney, and, in a group layoff, disclose the ages and job titles of who was and was not selected. Miss any element and the age-claim waiver is unenforceable even though the employee signed and kept the money. This is exactly why the release belongs with counsel; the letter simply points to it. This is general information, not legal advice.
Overly broad confidentiality and non-disparagement clauses are restricted
A separate legal development limits what a severance agreement can require an employee to stay quiet about. In its 2023 McLaren Macomb decision, the National Labor Relations Board held that offering a severance agreement with overly broad confidentiality or non-disparagement provisions can itself violate the National Labor Relations Act, because such clauses interfere with employees' protected right to discuss working conditions. The decision applies broadly to most private-sector employers, union or not, and the mere act of presenting such an agreement can be a violation. The practical effect is that boilerplate gag clauses copied from an old template are risky. This is one more reason the binding agreement should be drafted or reviewed by an attorney who is current on the rules, while your letter stays a simple summary. This is general information, not legal advice.
Pay after the revocation period, and mind state final-pay rules
Two timing points catch small businesses. First, when a release includes a revocation period, the severance should be paid only after that period passes without the employee revoking, because paying earlier gives away your leverage if they revoke. Second, severance is separate from the final paycheck, and many states have strict rules on when the final wages, including any unused vacation owed, must be paid, sometimes on the last day for an involuntary termination. Do not fold owed final wages into a severance payment contingent on a signature, since final wages are owed regardless of whether the employee signs a release. Pay the final wages on the state's schedule, and pay the severance after the revocation window. Confirm your state's final-pay rule before you set the dates. This is general information, not legal advice.
Why the Release Belongs With an Attorney
A waiver of age claims that misses any required element is unenforceable even after the employee signs and keeps the money, per EEOC guidance and 29 CFR 1625.22. Separately, overly broad confidentiality and non-disparagement clauses can violate labor law under the NLRB's McLaren Macomb decision. These are not risks a template can absorb, which is why the letter summarizes and the attorney drafts. This is general information, not legal advice.
The theme is a clean division of labor. The letter is yours to write and send; the release is counsel's to draft. That split is what lets a small business handle a separation humanely without taking on legal exposure it is not equipped to manage.
Employees 40 and Older: Extra Rules
When the departing employee is 40 or older and you want a release of age-discrimination claims, a specific federal law, the Older Workers Benefit Protection Act, sets requirements the agreement must meet. These apply to the agreement, not the letter, but you need to know they exist so you build in the time and route the drafting correctly.
Requirement
Individual
Group layoff
Time to consider the offer
At least 21 days
At least 45 days
Revocation period after signing
7 days
7 days
Must name the ADEA expressly
Yes
Yes
Written advice to consult an attorney
Yes
Yes
Disclose ages and titles selected
Not required
Required
Miss an Element, Lose the Waiver
If a severance agreement asking an employee 40 or older to waive age claims omits any required element, the age-claim waiver is unenforceable, even though the employee signed it and kept the severance. The 7-day revocation period in particular cannot be shortened or waived. Build the full review period into your timeline, and have counsel prepare the agreement. Pay the severance only after the revocation window closes. This is general information, not legal advice.
The takeaway is not that you cannot offer severance to an older employee; it is that the agreement must be done correctly, with the full timeline and the required language, by someone qualified. Your letter simply lets the employee know the offer is coming and that they will have time to review it.
Handling a Separation Without HR
A large company runs a separation through an HR team and in-house or outside counsel who handle the agreement as routine. A small business has an owner or a manager doing it personally, often for the first time, and often for someone they know well. The emotional and legal weight both land harder. The good news is that the part you most want to get right, communicating clearly and humanely, is exactly the part a letter handles, and the part that carries legal risk is the part you hand off.
You Write the Letter, Counsel Writes the Release
The clean division for a small business is simple: you handle the letter, the logistics, and the human conversation, and an employment attorney handles the binding agreement and release. You do not need an HR department to send a clear, respectful severance letter using a template. What you should not do is draft your own release of claims, especially for an employee 40 or older or in a group layoff, where the legal requirements are strict and unforgiving. Keep the human part; hand off the legal part. This is general information, not legal advice.
The single most valuable habit is to slow the timeline down enough to do it right: give the real review period, do not pressure a signature, and pay severance only after any revocation window closes. That patience protects both the employee's rights and your enforceable release.
Send, Route to Counsel, and Store
A severance letter works as part of a sequence: send the letter, route the release to an attorney, honor the review and revocation periods, pay correctly, and store the documents together. Getting that sequence right is what makes the separation clean and the release enforceable.
Send the letter
Give the departing employee the transmittal letter summarizing the package, clearly noting it is a summary and not the binding agreement.
Route the release to counsel
Have an attorney prepare the severance agreement and release, especially for anyone 40 or older, with the required review and revocation periods.
Let the clock run
Give the employee the full review period, honor any revocation window, and do not pressure a signature. Pay severance only after revocation passes.
Pay and store
Pay final wages on your state's schedule and severance after the window, then store the signed letter and agreement together on file.
The templates above work on their own. To run the offboarding around them, FirstHR stores the signed letter and agreement against the former employee's profile, captures acknowledgments with e-signature, the same flow it uses for the employee handbook, and keeps the offboarding steps in one place alongside the offboarding checklists. FirstHR is an onboarding and HR platform, not a law firm: it does not draft severance agreements, calculate final pay, or provide legal advice, so the binding release must come from a qualified employment attorney. Applicant tracking is coming soon to FirstHR.
Key Takeaways
A severance letter is a plain-language summary of the package; it is not the binding contract and should not contain the release of claims.
The binding document is the separate severance agreement, which contains the release and should be prepared by an attorney.
Severance is generally not legally required, but if you offer it for a release, the agreement carrying that release must meet legal standards.
For employees 40 or older, federal law requires a 21-day (or 45-day group) review period, a 7-day revocation, an express ADEA reference, and written advice to consult counsel.
Overly broad confidentiality and non-disparagement clauses in severance agreements are restricted under labor law.
A small business can write and send the letter itself but should route the binding release to a qualified employment attorney. This is general information, not legal advice.
Frequently Asked Questions
What is a severance letter?
A severance letter is a written notice from an employer to a departing employee that summarizes the severance package being offered: the severance pay, how final pay and unused PTO are handled, when benefits end and how COBRA continuation works, and what company property to return. It is a plain-language transmittal document, usually written by the employer or, in a small business, the owner or a manager. Crucially, the letter is a summary, not the binding legal contract. The document the employee actually signs to receive severance in exchange for giving up legal claims is the separate severance agreement, which contains the release. Keeping the letter and the agreement distinct is what lets a small business communicate the offer clearly while leaving the legally loaded release to an attorney. This is general information, not legal advice.
Is a severance letter the same as a severance agreement?
No, and confusing the two is the most common mistake. A severance letter is a short transmittal note that summarizes the package in plain language; it is written by the employer and is not binding on its own. A severance agreement is the binding legal contract, which contains the release of claims the employee signs to waive their right to sue in exchange for the severance. The letter typically accompanies the agreement as a readable summary and points to it. The distinction matters because the agreement carries serious legal requirements, especially for employees 40 and older, and restrictions on what confidentiality and non-disparagement terms it can include. The safe approach for a small business is to send a clear letter and have an attorney prepare the agreement. This is general information, not legal advice.
What should a severance letter include?
A severance letter should include the separation date and reason at a high level, the severance pay amount and how it is paid, how the final paycheck and any unused PTO are handled, when health benefits end and how to continue them through COBRA or a state program, what company property to return by when, a clear pointer to the separate severance agreement as the binding document, and a recommendation to have an attorney review that agreement, especially for employees 40 or older. It should close with a contact person and a respectful sign-off. What it should not include is the release-of-claims language itself; that belongs in the agreement, prepared by counsel. The letter's job is to communicate the offer clearly, not to be the legal contract. This is general information, not legal advice.
Is severance pay legally required?
In almost all cases, no. There is no federal law requiring private employers to provide severance pay; it is generally a matter of agreement between employer and employee. The main exception is if you have promised severance in an employment contract, an employee handbook, or an established policy, in which case you may be bound by that promise, and in rare mass-layoff situations the WARN Act requires advance notice, though that is notice rather than severance. Employers usually offer severance voluntarily, most often in exchange for the employee signing a release of claims that reduces the risk of a lawsuit. So while you generally do not have to offer severance, if you do offer it in exchange for a release, the agreement carrying that release must meet legal requirements. This is general information, not legal advice.
Do I need a release of claims with severance?
Only if your goal is to have the employee give up potential legal claims in exchange for the payment, which is the usual reason employers offer severance. If you simply want to give a goodwill payment with no strings, you can do that with a letter and no release, but understand that the employee keeps all their rights to bring a claim. If instead you want the protection of a release, the employee must sign a severance agreement containing it, and that agreement must meet legal standards, including strict rules for anyone 40 or older and limits on confidentiality and non-disparagement clauses. The no-release template on this page is for the goodwill case; for a release, use an attorney-prepared agreement. Weigh whether the legal protection of a release is worth the cost and process for your situation. This is general information, not legal advice.
What are the OWBPA rules for employees over 40?
When an employer asks an employee age 40 or older to waive age-discrimination claims in a severance agreement, the Older Workers Benefit Protection Act sets strict requirements for that waiver to be valid. The agreement must give the employee at least 21 days to consider the offer, or at least 45 days if it is part of a group layoff or termination program, and a 7-day period after signing during which they can revoke, which cannot be shortened. The agreement must expressly reference the Age Discrimination in Employment Act by name and advise the employee in writing to consult an attorney before signing. In a group layoff, it must also disclose the ages and job titles of employees selected and not selected. If any required element is missing, the age-claim waiver is unenforceable even if the employee signed. Because of this, the agreement should be prepared by counsel. This is general information, not legal advice.
When should severance be paid?
Severance tied to a release should generally be paid only after any revocation period has passed without the employee revoking, because paying earlier gives up your protection if they change their mind. This is separate from the final paycheck. Final wages, including any unused vacation you owe under policy or state law, are owed regardless of whether the employee signs a release, and many states require them to be paid quickly, sometimes on the last day for an involuntary termination. So the sequence is usually: pay the final wages on your state's required schedule, and pay the negotiated severance after the review and revocation windows close. Do not make owed final wages contingent on signing a release. Confirm your state's final-pay timing before setting dates. This is general information, not legal advice.
Can a small business handle severance without an HR team?
Yes, with the right division of labor. A small business owner or manager can absolutely write and send the severance letter, which is a plain-language summary, and handle the logistics of final pay, benefits, and property return. What a small business should not do without help is draft the binding release of claims itself, especially for an employee 40 or older or in a group layoff, because the legal requirements are strict and the cost of getting them wrong is high. The practical model is: you send a clear, humane letter using a template, and you have an employment attorney prepare the agreement and release. That keeps the human, communicative part in your hands and the legally loaded part with someone qualified to handle it. This is general information, not legal advice.
