Employment Termination Agreement: Smoothly and fairly
This article is valid only for the Czech Republic.
What Is an Agreement on the Termination of Employment?
Think of it as a mutual understanding between two parties saying: “It’s been good, but it’s time to move on.” This agreement is a contractual document where the employee and employer jointly establish the conditions for ending their collaboration.
Unlike a resignation or dismissal, which involves legally mandated notice periods, an agreement offers maximum flexibility—you can set a specific termination date that suits both parties. It’s like an amicable breakup.
When Is It Useful?
- For Employers: If you need to part ways with an employee for reasons such as underperformance, organizational changes, or other circumstances, an agreement offers greater flexibility. Termination through dismissal is only possible under specific conditions outlined in Section 52 of the Labor Code. However, keep in mind that the term “agreement” implies mutual consent. If the employee doesn’t accept your terms, you may need to adjust them or explore alternative solutions.
- For Employees: If you’re seeking a new challenge and don’t want to wait out the notice period, an agreement can be ideal. But again, the proposed termination date must be acceptable to the employer; otherwise, you’re out of luck.
Resignation vs. Agreement: A Quick Comparison
| Termination Type | Initiator | Notice Period | Conditions |
|---|---|---|---|
| Resignation | Employee or employer | 2 months | Employers can only terminate under conditions specified by labor law. |
| Agreement | Employer or employee | Not required, unless agreed otherwise | Both parties agree on the terms of termination. |
Minimizing Conflict and the Importance of Ethics
No one likes conflict—especially in the workplace. An agreement on the termination of employment acts as a preventative measure against unnecessary disputes and legal battles. It’s an elegant solution that reduces the risk of contention.
Caution! As an employer, you must never pressure an employee into signing such an agreement. This isn’t just unethical; it’s also illegal.
Ethical Conduct
When a company acts ethically, it strengthens its reputation and demonstrates respect for every individual—even when the professional relationship is coming to an end. An employee who leaves on good terms is far less likely to speak negatively about the company to friends or on social media. And believe me—bad press spreads faster than a cough.
Moreover, a positive experience resonates with current employees, who see that the company treats people fairly and with respect. This fosters loyalty and trust across the organization. A thoughtful approach to employee departures isn’t just about maintaining your image; it also contributes to long-term stability and builds your employer brand as a reputable workplace.
How to Prepare an Agreement That Meets All Legal Requirements?
You might be wondering: “Shouldn’t we have a template for this?” Yes, you should! But be cautious with online templates—not all of them are accurate. Every company has its own specifics, and outdated templates can lead to unnecessary complications. The best approach is to have your legal department prepare a template that aligns with current legislation, ensuring a smooth and legally sound termination process.
What Should a Termination Agreement Include?
Now, onto the practical part. The agreement must be clear, concise, and above all, legally bulletproof. Here’s what it should contain:
- Identification of both parties: Include the names, addresses, and, if applicable, the company’s registration number.
- Termination date: Specify the exact date of employment termination.
- Reason for termination (optional): While not mandatory, providing reasons such as organizational changes can help the employee when dealing with labor authorities.
- Financial compensation (if applicable): Clearly outline any severance pay or other compensation, specifying what the employee will receive and when.
- Signatures of both parties: The agreement must be in writing and signed by both the employer and the employee.
Sick Leave and Employment Termination
If an employee is on sick leave while their employment is ending, their entitlement to sick pay remains intact. This is important for both the employee and the employer. Don’t overlook this, as it’s not uncommon for employees to take sick leave during this period.
HR Responsibilities:
- Administration is key: All documents must be correctly managed and submitted to relevant institutions (health insurance companies, social security authorities) on time.
- Informing the employee: The employee should understand what lies ahead—how benefits will be paid and what steps they need to take.
- Communication with the health insurance company: Inform the health insurer about the termination of employment and the continuation of the employee’s sick leave.
Termination Agreement Upon Retirement
Retirement is a significant life milestone, but it doesn’t automatically terminate the employment relationship. To formalize the process, a termination agreement must be signed, clearly specifying the end date and any conditions, such as severance pay or a farewell benefit.
For employees, this is an opportunity to part ways amicably and close the chapter of their career with dignity. For the company, it’s the perfect moment to show appreciation for years of service. A well-prepared agreement and a fair approach ensure a smooth transition into retirement, leaving both sides with positive memories.
Unemployment Benefits
An employee who signs a termination agreement is eligible for unemployment benefits, provided they register with the employment office on time. Starting in 2024, any severance pay received will no longer delay the start of unemployment benefit payments. The duration of benefits depends on the employee’s age:
- Up to 50 years: 5 months
- 50–55 years: 8 months
- Over 55 years: 11 months
HR should ensure that the employee receives all necessary documents, such as the employment record or proof of termination. Proper administration helps the employee transition smoothly into their new situation.
Employee Offboarding
An employee’s departure doesn’t have to mark the end of the relationship between them and the company—it can be the start of a new chapter. When offboarding is handled correctly, it leaves the departing employee with a positive impression and strengthens the company’s reputation as a fair and responsible employer.
Offboarding isn’t just about returning keys or deactivating system access. It’s an opportunity to show that the company acts with respect and professionalism until the very last day.
A good offboarding process includes ensuring the employee leaves with all the documentation they need for their next steps. Upon departure, the employee should receive:
- An employment record,
- A certificate of taxable income,
- A certificate of employment termination (e.g., for the employment office),
- The signed termination agreement or notice,
- A confirmation of severance payment (if applicable).
Complete and well-prepared documentation not only fulfills legal obligations but also demonstrates that the company has its processes under control and values the dignity of its employees. Professionally managed offboarding leaves a positive impression not only on the departing employee but also on those remaining, reinforcing trust in the entire organization.
