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A Severance Agreement is a legally binding contract between an employer and departing employee that sets out the final terms of their separation. It typically includes the severance pay amount, benefits continuation, and other key details aligned with Hong Kong's Employment Ordinance requirements.

These agreements protect both parties by clearly spelling out mutual obligations and often include confidentiality clauses, non-compete restrictions, and a release of potential claims. While not mandatory under Hong Kong law, they're commonly used when senior executives leave or during restructuring to ensure smooth transitions and prevent future disputes.

Consider using a Severance Agreement when ending employment relationships on mutually agreeable terms, especially for senior executives or during company restructuring. These agreements are particularly valuable when dealing with sensitive departures that could impact company secrets, client relationships, or market position in Hong Kong.

Key moments to implement include voluntary resignations with generous exit packages, redundancies involving multiple employees, or situations where protecting confidential information is crucial. The agreement helps prevent future disputes by clearly documenting the separation terms, benefits, and any ongoing obligations like non-compete clauses or confidentiality requirements under Hong Kong law.

• Mutual Termination Agreement: Used when both parties agree to end employment amicably, with balanced terms and mutual releases
• Employee Non Compete Agreement: Focuses on post-employment restrictions and competitive protections alongside severance terms
• Severance Notice: Formal communication of severance terms, often used in mass layoffs or restructuring
• Settlement Offer Letter: Initial proposal outlining severance package terms before finalizing the full agreement
• Employee Service Agreement: Comprehensive document incorporating severance provisions within broader employment terms

• Human Resources Directors: Lead the drafting and negotiation of Severance Agreements, ensuring compliance with Hong Kong employment laws and company policies
• Legal Counsel: Review and refine agreement terms, advise on enforceability, and protect company interests
• Departing Employees: Review, negotiate, and ultimately sign the agreement, often with their own legal advisors
• Company Directors: Approve significant severance packages and authorize final terms, especially for senior executives
• External Employment Lawyers: Provide specialized advice on complex cases or when disputes arise
• Payroll Teams: Process severance payments and ensure proper documentation for tax purposes

• Employment Details: Gather exact dates of employment, current salary, bonus history, and benefit entitlements
• Severance Package: Calculate total compensation including unused leave, pro-rated bonuses, and any special benefits
• Company Property: List all items for return including laptops, security passes, and confidential documents
• Restrictive Covenants: Define non-compete terms, confidentiality requirements, and client non-solicitation periods
• Tax Implications: Document payment schedule and tax treatment under Hong Kong regulations
• Release Clauses: Specify which claims are being released and any exceptions
• Template Selection: Use our platform's Hong Kong-compliant templates to ensure all mandatory elements are included

• Identification Section: Full names and details of employer and employee, including Hong Kong business registration numbers
• Payment Terms: Detailed breakdown of severance amount, payment schedule, and tax considerations
• Release Provisions: Clear statement of claims being waived under Hong Kong employment law
• Confidentiality Clauses: Specific obligations regarding company information and trade secrets
• Post-Employment Restrictions: Non-compete and non-solicitation terms compliant with local regulations
• Return of Property: List of company assets to be returned and timeline
• Governing Law: Explicit reference to Hong Kong law and jurisdiction
• Execution Requirements: Signature blocks with witness provisions as needed

A Severance Agreement differs significantly from a Business Acquisition Agreement in Hong Kong, though both involve ending relationships. While severance deals with individual employment termination, business acquisition covers the broader transfer of company ownership and assets.

• Purpose: Severance Agreements focus on employee departure terms and benefits, while Business Acquisition Agreements handle complete business transfers
• Scope of Release: Severance covers employment-related claims and obligations, acquisition deals address company-wide liabilities and warranties
• Parties Involved: Severance is between employer and employee, acquisition involves business owners, shareholders, and corporate entities
• Duration: Severance typically deals with immediate termination and short-term obligations, while acquisitions often include long-term transition periods and ongoing commitments
• Regulatory Framework: Severance follows Hong Kong employment law, acquisitions involve corporate, securities, and competition regulations