Use this where a departure is being settled by agreement rather than by unilateral termination — typically where there is a dispute, an enhanced payment, or a need for finality. A release cannot waive statutory entitlements, and an agreement signed under pressure at the moment of payment is worth less than one negotiated with time and advice.
Separation Agreement
Between [COMPANY NAME] and [EMPLOYEE NAME]
Use this where a departure is being settled by agreement rather than by unilateral termination — typically where there is a dispute, an enhanced payment, or a need for finality. A release cannot waive statutory entitlements, and an agreement signed under pressure at the moment of payment is worth less than one negotiated with time and advice.
THIS SEPARATION AGREEMENT is made at [PLACE] on [DATE]
BETWEEN:
(1)[COMPANY NAME], a company incorporated under the Companies Act, 2013, bearing CIN [CIN], having its registered office at [ADDRESS] (the "Company"); and
(2)[EMPLOYEE NAME], [son / daughter of ______, aged ______ years], residing at [ADDRESS], holding PAN [PAN] (the "Employee").
Recitals
A.The Employee was employed by the Company as [DESIGNATION] from [DATE OF JOINING] under a letter of appointment dated [DATE].
B.[The Employee has tendered a resignation dated ______ / The Company has proposed to end the employment / Differences have arisen between the parties], and the parties have agreed to record the terms on which the employment will end.
C.The parties enter into this Agreement to achieve a full and final settlement of all matters between them arising out of the employment and its termination, on the terms set out below.
NOW THEREFORE the parties agree as follows:
1. Termination of Employment
1.1The Employee’s employment with the Company will end on [DATE] (the "Separation Date") by [mutual agreement / resignation, accepted by the Company / termination by the Company on notice].
1.2With effect from [DATE], the Employee is [released from the obligation to attend the workplace and placed on garden leave until the Separation Date, remaining an employee and continuing to receive salary and benefits / required to continue performing duties until the Separation Date].
1.3The Employee will, on or before the Separation Date, complete the handover set out in Schedule 1, return all property, records, devices and credentials of the Company, and complete the clearance formalities.
1.4The Employee resigns with effect from the Separation Date from every office held in the Company and in any of its group companies, including any directorship, and will execute the resignations required. The Employee confirms that no claim is or will be made for compensation for loss of office.
2. Payments
2.1The Company will pay the Employee:
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
Clause 2.2 does this deliberately. Salary, leave encashment, gratuity and reimbursements are owed whether or not the employee signs anything, and offering them as though they were consideration for a release is both wrong and likely to invalidate the release. The ex gratia payment is the consideration. Keep the two visibly separate in the payment table.
Provident fund and gratuity accrue by statute and cannot be signed away. Nor can the right to complain of sexual harassment, to report a matter to a regulator, or to give evidence. Clause 4.3 carves these out expressly. A release drafted as though it covers everything is not merely ineffective on those points — it casts doubt on the whole clause.
An agreement presented at an exit meeting with a pen and a demand for an immediate signature is worth far less than one provided several days in advance with a recommendation to take advice. Clause 7.1 records the period given. Fill in a real number. Where the amounts are significant, a short revocation window as in Clause 7.2 further strengthens the agreement.
Wages due on termination must be paid within two working days of the employment ending. Structuring an agreement so that accrued salary and leave encashment are paid only after the release is signed does not comply. The ex gratia amount may be made conditional; the statutory entitlements may not.
Clause 3.1 requires the option position to be stated. Unvested options lapsing, a short exercise window, and a cash tax charge on exercise combine so that a departing employee frequently forfeits everything. Whether the Company chooses to accelerate or extend is a commercial decision, but leaving the position unstated in a separation agreement guarantees a dispute later.
Schedule 3 fixes what the Company will say. Without it, the agreed narrative survives only as long as the people who agreed it. Nominate a single mailbox for references and make clear that nobody else is authorised, because an off-script reference from a former manager is the most common way a settled departure becomes unsettled.
A company cannot realistically control every employee. Clause 6.2 limits the obligation to directors and to those employees who know of the agreement, which is enforceable and honest. A clause purporting to bind the entire workforce is neither.
Clause 5.5 states the position. A post-employment non-competition restraint is void and will not be enforced. Including one in a separation agreement is worse than including it in an employment contract, because the employee has just been paid for a release and may reasonably believe the restraint is binding. Rely on confidentiality, non-solicitation and the return of information.
Clause 5.3 addresses personal devices, personal cloud storage and personal email. Simply returning a laptop does not address material forwarded to a personal account, which is where most post-departure data problems originate. Ask the specific question and record the answer.
A separation agreement should not be used to make a live complaint go away. A complaint under the sexual harassment legislation must be inquired into, and Clause 4.3(e) preserves the right to complain and to give evidence. Settling the employment relationship is legitimate; suppressing an inquiry is not, and an agreement that appears to do so is likely to be unenforceable and reputationally serious.
The characterisation of a separation payment affects its taxability and the withholding obligation. Do not state a tax position in the agreement beyond the fact that tax will be deducted as required. Advise the employee to take independent advice, as Clause 2.3 does, and take advice yourself before fixing the amount.
Where the employee held a directorship, Clause 1.4 obliges resignation from every office. Confirm the filings are made, and confirm that any indemnity and insurance cover for past acts survives — Clause 4.3(c) preserves it, and a former director will reasonably expect it.
Reflects Indian law current as of {{DATE OF USE}}. Settlement timelines, statutory entitlements and the enforceability of release terms change — have any separation agreement involving a material payment or a live dispute reviewed by an employment adviser before it is offered.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.