Termination by agreement

What it means

Termination by agreement is a bilateral act: the employee and the employer agree that the employment ends on an agreed day. It has to be in writing, and each side keeps a signed copy of it.

It differs from a notice of termination in being consensual, and no notice period follows it. The employment ends on exactly the agreed day, which may well be the day of signature, rather than when a statutory period expires.

An agreement is not restricted by the protected period. An employer may not give notice to, say, an employee on maternity leave or on sick leave, but it may conclude an agreement with them if they consent. Consent is what matters - an agreement signed under pressure can be challenged as invalid.

How it works in practice

The reason goes into the agreement when the employee asks for it, and always where the ground lies with the employer, such as organisational change or medical unfitness. Entitlement to severance pay hangs on that reason.

On the closing day the employer settles the wage and the pay for untaken leave, deregisters the employee from the Social Insurance Agency and the health insurer within the statutory deadline, and issues an employment confirmation.

It pays to write the practical points into the agreement too: the date for returning the laptop and access cards, settlement of travel advances, and whether a non-compete clause applies. Where the agreement is silent, these points are dealt with only after departure, when the employee no longer has a reason to be accommodating.

What to watch out for

Where a post is abolished and the agreement records no organisational ground, the employee can still recover severance later. A court looks at the real reason rather than at the wording, and interest and legal costs come on top.

An unclear or later altered end date causes trouble at every step that follows: deregistration from the insurers, the final pay and compensation for untaken holiday are all counted from it. The agreement therefore names a specific calendar day and both copies must match; handwritten changes after signature lead to disputes.