Severance Agreement: A good alternative to redundancy

A severance agreement can be a good alternative to being made redundant, as it allows you to negotiate better termination terms. Get help with your negotiations here.

If there are redundancy warnings at your workplace, or you expect to be dismissed, a severance agreement may be a favourable alternative.

A severance agreement replaces a standard dismissal, allowing you and your employer to agree on more flexible – and potentially better – terms for your departure.

However, always ensure IDA’s legal advisors review your severance agreement before you sign. Otherwise, you risk waiving your right to later make claims against your employer, for example, in the case of unfair dismissal.

What is a Severance Agreement?

A severance agreement replaces a standard dismissal and sets out the terms under which you will leave your position.

Such agreements are more flexible and are often used by employers to offer better conditions than those stated in your contract as a form of goodwill.

You should only sign a severance agreement if it provides equal or better terms than those you are otherwise entitled to.

You can refuse to sign a severance agreement – but doing so may result in you being made redundant instead.

There are various reasons why you and your employer might wish to enter into a severance agreement:

Your employer wants to treat you fairly, offering better conditions than usual.
Both you and your employer wish to avoid formal redundancy proceedings.
You or your employer wish to deviate from certain statutory rules.

Am I Entitled to a Severance Agreement?

A severance agreement is a mutual arrangement between you and your employer. It is not something you are automatically entitled to.

Read about your rights if you are made redundant

Can I negotiate a severance agreement in the public sector?

Yes, as a public sector employee, you can negotiate a severance agreement. However, some public institutions may generally avoid entering into such agreements.

If you are a public sector employee and want to discuss your options, you should contact IDA’s legal team.

How do I negotiate a severance agreement?

You cannot demand that your employer enters into severance negotiations. However, if you wish to explore the possibility, IDA’s legal experts can help you prepare and start the process.

Generally, it is best if you negotiate directly with your line manager, but in some cases, IDA’s legal advisors may negotiate on your behalf.

When should I ask for a severance agreement?

It might be a good idea to ask for a severance agreement if you have already been dismissed and want to negotiate better terms than those given in your notice.

It may also be appropriate if you are experiencing poor wellbeing or conflicts at work.

Before requesting a severance agreement, you should always speak to one of IDA’s legal advisors.

Can I negotiate a severance agreement while on sick leave?

Yes, you can negotiate a severance agreement while on sick leave, but it may not always be advisable. As a salaried employee, you are entitled to pay during sickness, which provides financial security.

However, if your illness is caused by specific conditions at work, a severance agreement may be the best option.

If you are considering this – or if your employer presents you with an agreement during your sick leave – always consult IDA’s legal team first.

Can I get a severance agreement after being dismissed under the 120-day rule?

There are no restrictions on entering into a severance agreement after dismissal under the 120-day rule. However, your employer may not see a benefit in doing so in this situation.

What should a severance agreement include?

Your severance agreement should address several key points to ensure you are not worse off than if you had simply been dismissed.

Always send your employment contract to IDA’s legal team so they can review your agreement before you sign it.

Here are some points you may want to negotiate in your agreement:

Notice period: It should be at least as long as if you were dismissed.
Reason for leaving: To avoid benefit sanctions from you A-kasse, it must be clear that your employer initiated the termination.
Bonus: Ensure you still earn any bonuses during your notice period. Read more about bonuses after dismissal
Holiday pay: Ask for earned holidays to be paid as holiday allowance rather than having to take them. Read more about holidays and dismissal
Severance pay: Try to secure severance pay regardless of seniority or the reason for leaving. Read more about severance pay
Garden leave: Negotiate the option to be released from duties during the notice period. Read more about garden leave
Job hunting: Ask for time off to attend interviews and ensure that earnings from a new job don’t reduce your settlement pay.
Restrictive clauses: Negotiate the cancellation, limitation or fair compensation for non-compete or customer clauses. Read more about restrictive clauses
Benefits: Retain your work phone, car or other employee benefits.
Outplacement: Ask for a paid outplacement programme to support your job search.
Overtime: Request payment for accrued overtime instead of taking it as time off.
Official reason: Agree on a shared explanation to communicate to colleagues, clients and partners.

What Is Severance Pay?

If you’re a salaried employee and have worked for your employer for a long time, you may be entitled to severance pay if dismissed.

Read when you’re entitled to severance pay

What Are “G Days”?

G Days stands for “compensation days” (godtgørelsesdage).

Your employer must pay G Days if you’re dismissed and have worked at least 74 paid hours in the past 4 weeks. You’re entitled to a minimum of 2 and a maximum of 16 G Days per year.

These days are deducted from your unemployment benefit, and you must declare them on your benefits form.

Your employer will typically provide a form you must sign to receive G Days with your final payslip. Your employer is not required to pay G Days if:

You resigned
You’ve started a new job
You’re off sick
You’re on holiday
You’ve started a subsidised job
You’ve retired