A buyout means that an employer and an employee agree to terminate the employment on a voluntary basis, usually because there are no valid reasons for termination. The following will discuss what a buyout entails, how the compensation can be determined, what applies during the notice period, and how the unemployment benefit is affected by an agreement to terminate. We will also go through important factors that both parties should consider before entering into a buyout agreement.
In the workplace, there can be situations where an employer wants to terminate an employee even though there are no valid reasons for termination in the usual way. In these cases, there is a possibility for the parties to reach an agreement where the employee's employment ends on the conditions decided by the parties in a written buyout agreement.
A buyout is always a voluntary agreement. Therefore, neither the employer nor the employee can demand a buyout. There is also freedom of contract, which means that both parties have several important factors to consider before entering into a buyout agreement.
It is important to be thorough in the drafting of the buyout agreement since both parties are bound by the contractual terms specified. All aspects relevant to the termination of employment should be regulated in the buyout agreement. This includes information about the contracting parties, when the employment will cease, whether any severance payment should be made and when it should be paid, what will happen to the employee's vacation, and other employment-related terms.
As there is freedom of contract and the agreement is voluntary, there are no fixed amounts for a severance payment. Typically, the parties negotiate themselves or through representatives to reach an agreement that is reasonable based on the circumstances in your individual case. In the negotiations, you can also negotiate other favorable contractual terms, such as being relieved from work during your notice period.
Regardless of the contractual terms you decide upon, you always have the right to your statutory or agreed upon notice period. The general rule is that you are obligated to work during the notice period and must be available to the employer, but you can also agree to be relieved from work during this period. You have the right to keep your employment benefits throughout the notice period, in addition to your salary.
You should also keep in mind that the duty of loyalty applies even during your notice period. This means that the employer's interests should be prioritized over your own, and you should not act in a way that could harm or risk being disloyal to your employer.
Before signing a buyout agreement, it is good to contact your unemployment insurance funds to get information about your entitlement to compensation in your specific case. When it is not a matter of termination due to redundancy, the possibilities for compensation may be affected. Typically, you will be without unemployment benefits during the period you receive a severance payment, as this is considered to be salary. If you are still without employment after this, there may be an opportunity for unemployment benefits.
As there is freedom of contract and the agreement is voluntary, there are no fixed amounts for a severance payment. Typically, the parties negotiate themselves or through representatives to reach an agreement that is reasonable based on the circumstances in the individual case. In the negotiations, you can also negotiate other contractual terms.
Regardless of the contractual terms you decide upon, the employee always has the right to their statutory or agreed upon notice period. The general rule is that the employee is required to work during the notice period and must be available to you, but you can also agree to have the employee relieved from work during this period. The employee has the right to keep their employment benefits throughout the notice period, in addition to their salary.
