Exit Packages: What Are They and How do I Get One?
- Anne-Marie Dolan
- Sep 29
- 9 min read
When an employment relationship comes to an end under stressful or contested circumstances, both parties may prefer a negotiated, managed exit rather than a drawn out dispute. That’s where an exit package (sometimes called a settlement agreement, negotiated exit, or severance package) comes into play.
What is an exit package?
An exit package is essentially a mutually agreed arrangement between an employer and an employee to bring employment to an end on terms acceptable to both sides. Under that agreement, the employee typically agrees to resign (or accept termination) and, in return, receives compensation and other benefits, and usually gives up certain claims (such as personal grievance claims) against the employer.
In New Zealand, exit packages are not a statutory entitlement in most cases but they are a pragmatic tool, often used when continuing the employment relationship is untenable or where the cost (financial, relational, reputational) of a dispute is high.
It is important to recognise that an exit package is not the same as a dismissal or redundancy (though it may substitute for those in practice). It is a negotiated outcome, not a unilateral right.
When Can an Exit Package be Negotiated?
Because exit packages are not mandated in most cases, whether you can get one depends on circumstances, bargaining strength, and employer willingness. Below are common scenarios in which exit packages tend to arise:
Breakdown in employment relationship, conflict or tension
When trust, communication, or working relationship deteriorates (e.g. persistent conflict, bullying, personality clashes, or managerial breakdown), the parties may conclude that continuing is impossible. Rather than dragging out performance management or disciplinary processes, an exit package may offer a cleaner exit.
Where the employer wishes to remove the employee but wants to avoid an outright dismissal
If the employer anticipates risk of a personal grievance or reputational damage, it may prefer to propose an exit package as an alternative route. This is especially true where the employer is uncertain about whether a dismissal would be defensible. However, employers must be careful: in current law, proposing an exit package can itself be risky if not managed carefully. Courts/Authorities have sometimes held that an employer’s pressure on an employee to resign and accept an exit package could amount to constructive dismissal or be used as evidence in a personal grievance.
Redundancy or reorganisation
In some redundancy or restructuring situations, rather than strictly applying redundancy policy, the employer may prefer to offer an exit package (sometimes more generous than minimal redundancy entitlements) to certain employees. This often occurs in more senior levels or in smaller organisations where the cost of a full legal process is disproportionate.
As part of a settlement of a dispute or threat of personal grievance
If an employee has (or is prepared to raise) a personal grievance claim, an exit package may serve as a financial settlement to avoid going through mediation or Authority proceedings. The “without prejudice” communications leading to such a settlement may carry confidentiality protections (if structured properly).
Indeed, current proposals in Parliament (the Termination by Agreement Bill / TEA Bill) aim to create statutory “protected negotiations” for exit discussions so that neither side can use the negotiation as evidence in subsequent proceedings (except in cases of dishonesty).
What Might an Exit Package Include?
Because exit packages are negotiated, there is wide variation. But some common components include:
Financial compensation including lump sum payment, payment in lieu of notice or continuation of salary through the notice period, payment for unused accrued leave or other leave entitlements, bonuses, commissions, or other contractual payments owing (pro rata, if applicable) and/or additional “premium” or goodwill amount to compensate for the risk of claims, or to soften the departure.
Waivers or releases of future claims of personal grievances, breach of contract, etc.) in exchange for the package.
Confidentiality and non‑disparagement clauses
Reference, certificate of service, agreed statement of employment history
Deferred benefits or retention of benefits for a period such as continued provision of insurance, medical/dental benefits, company car, laptop or phone for a transition period.
Outplacement support or career transition services The employer may include assistance such as help with CV preparation, coaching, counselling, and relocation assistance.
Timing and structure The agreement may structure how and when payments are made or tax treatment.
A Mathews Walker advocate shared they have negotiated such options as an employee’s company car (in lieu of cash), tools of work such as laptop, phone etc, approved exit language and message to wider team and clients, and employer contribution towards future training or education.
The terms of the exit package or settlement are usually captured in a confidential formal 'Record of Settlement' that both parties sign.
Because exit packages are negotiated, the exact mix and amounts will depend on the facts, the strength of your legal position, the employer’s appetite, your leverage, your prospects of finding a new role, and your willingness to litigate.
It is very important that independent advice be part of the process. The agreement should expressly allow or require the employee to seek independent legal advice before signing. Courts or the Authority may scrutinise whether the employee was pressured or uninformed.
Legal and Statutory Considerations in New Zealand
When considering exit packages, it is essential to understand the legal context in New Zealand:
The ERA imposes obligations of good faith in all dealings between employer and employee including negotiation of termination or settlement. That means neither side can mislead or act in a manner that undermines trust.
Under the ERA, employees may have recourse to the Employment Relations Authority or Employment Court for personal grievances (e.g. unjustified dismissal, disadvantage, harassment), unless they release those claims in a negotiated agreement.
The ERA ensures procedural fairness in dismissals: even if an employer offers an exit package, it must be careful not to bypass fair process or create the appearance of forced resignation.
If a dismissal occurs without following a fair process, it may be deemed unjustified, and an employee may obtain remedies (reinstatement or compensation).
Constructive Dismissal / Resignation under duress
If an employer's conduct effectively forces the employee to resign (for example, by making the workplace intolerable), that may amount to constructive dismissal. In such a case, the employee may treat the resignation as a dismissal and pursue a personal grievance. If the exit package negotiation is not handled delicately, it might bolster a claim that the employer forced the resignation.
'Without prejudice' and confidentiality of negotiations
In current law, for exit‑package discussions to remain confidential and not admissible in later proceedings, the communications usually need to be conducted on a 'without prejudice' basis (i.e. during a genuine attempt to settle a dispute). That protection is not absolute if there is no existing dispute, or, if the communications are not carefully framed, they may not qualify.
Disclosures, tax, and legal enforceability
Any agreement must comply with general contractual principles (e.g. offer, acceptance, consideration, capacity). If an agreement is entered under duress, undue influence, or misrepresentation, it may be challenged. Courts/Authorities may also examine whether the employee was given reasonable time and opportunity to obtain independent advice as part of ensuring fairness. From a tax standpoint, payment should be carefully structured as some severance components may be taxed differently. Importantly, no exit package can override your statutory minimum entitlements (e.g. you cannot be made to forfeit rights to pay for accrued annual leave, or Minimum Wage, or other statutory protections).
How do you Negotiate an Exit Package?
Negotiating an exit package is delicate. To follow is a step‑by‑step guide to negotiations:
Carefully assess your position and entitlements by reviewing your employment agreement and assessing whether you have grounds for a personal grievance or unfair dismissal. You may wish to bring in an advocate at this stage to advise you on risks and strategy.
Open the negotiation (or respond to the employer) by requesting a meeting with your employer to explore the possibility of an exit by mutual agreement.
Enter into negotiations on the basis of 'without prejudice' and 'subject to settlement' so that what you say cannot be used as admissions in later legal proceedings.
Ensure that any agreement gives you the right to take up independent advice before signing including a reasonable time (often a few days) to review the agreement and a short cooling-off period during which you can reconsider before signing.
Finalise the agreement with the terms agreed in principle drafted into a formal Record of Settlement or Settlement Agreement. Once signed, act promptly to perform your side (resign or last working day) and ensure the employer honours the payment schedule.
How can an Employment Advocate Can Help?
An employment law advocate is someone experienced in employment relations, who can assist you in navigating the negotiation, protecting your interests, and improving outcomes. Here are several ways an advocate is valuable:
Risk assessment and strategy
An advocate can assess your legal position, estimate your strength (in terms of personal grievances, unfair process, statutory entitlements), and help craft a negotiation strategy that maximises your leverage while minimising risk.
Drafting and reviewing proposals
Advocates can prepare your settlement proposal or respond to the employer’s proposals, ensuring that the drafting is precise, legally sound, and covers your interests (waivers, carve-outs, confidentiality, reference, timing, tax treatment, etc.).
Maintaining negotiating discipline
Negotiations can become emotional or one-sided; an advocate helps maintain professionalism, guard against coercion, and prevent you from inadvertently making statements that undermine your position.
Ensuring independent advice is integrated
A good advocate ensures that the agreement allows sufficient time and opportunity for you to receive independent advice, which strengthens your position and the enforceability of the agreement.
Mediation support or facilitation
If negotiations stall, an advocate can facilitate mediation, or represent you in a mediated setting. Their presence can help keep the discussion anchored in legal reality rather than emotion.
Enforceability and follow‑up
After the agreement is signed, an advocate can help ensure the employer abides by the agreed terms and can assist in enforcing the agreement if necessary.
An advocate levels the playing field in an otherwise unequal relationship, helps protect you from pitfalls, and increases the likelihood of a better financial and reputational outcome. Many exit‑package negotiations succeed precisely because the employee is well advised and credible in their proposals.
A Mathews Walker advocate recently commented that often employers have reach a point where, for whatever reason, they would like to broach the idea of an exit with an employee but they don't know how to approach it without causing offence and/or doing the wrong thing. Equally, the employee can get to a stage where they realise they don't really want to work there anymore but aren't really sure how to address the issues that suggest departure. This is where an advocate who has the skills and experience to talk calmly to both parties about what they would like to happen, but who isn't emotionally tied to the situation, can work with both parties to seek common ground and a suitable exit package.
FAQs (Frequently Asked Questions)
Q: Is an exit package a legal entitlement in New Zealand? A: No. In general, there is no statutory right to receive an exit package (beyond your minimum entitlements such as payment of accrued leave). Exit packages are negotiated outcomes. However, in cases of dispute or risk, they are commonly used as a settlement mechanism.
Q: If I resign under an exit package, can I later claim it was dismissed unfairly? Potentially yes, especially if you were pressured or coerced into resigning. If your resignation was not truly voluntary but a response to intolerable conduct (i.e. constructive dismissal), then an exit agreement might not preclude a personal grievance claim unless the agreement is carefully and fairly drafted. That’s why the negotiation process must be handled sensitively.
Q: Can an employer force me to accept an exit package? No. You must voluntarily agree to the terms. If an employer tries to compel submission, that may itself be a ground for grievance. You should insist on negotiation, independent advice, and refusal to sign under duress.
Q: What if my employment contract already has a “severance” clause or “redundancy” clause? An exit package must not deprive you of what you are contractually or statutorily entitled to. On that basis, your negotiation should aim to improve on, not reduce, what the contract provides.
Q: How much can an exit package realistically be? That depends heavily on your leverage, length of service, the strength of any claims, your ability to litigate, and employer risks. As a ballpark, you might see offers equal to several weeks to several months’ salary beyond strict entitlements. But there is no one-size-fits-all.
Q: What if I sign the settlement agreement, and later regret it? Once signed, the agreement is binding. That’s why independent advice and a cooling-off period are critical. In rare cases, there may be a right to rescind, but it’s not easy.
Q: Will negotiations for an exit package be admissible in later legal proceedings? Under current law, that depends. If the communications are properly framed “without prejudice" or "subject to settlement,” they often won’t be admissible. But if badly framed, they might be. That’s a key risk.
Q: Should I use an employment advocate or lawyer in negotiating? Absolutely. Having professional representation significantly improves your chances of a fair outcome. The advocate or lawyer helps assess risk, design proposals, maintain negotiating discipline, and protect you from pitfalls.
An exit package is not a magic wand, but done well, it offers a dignified, efficient, and lower-risk way to depart a difficult employment relationship. Because it sits at the intersection of contract, employment law, and power dynamics, the quality of negotiation and drafting is everything. Many employees who navigate exit package discussions with the help of an employment advocate end up much better off financially, reputationally, and emotionally, than they would have by forcing a legal fight. If you feel that an exit package might be the right way to end your employment dispute, get in touch with an advocate for a free consultation. MathewsWalker.co.nz | 0800 612 355
Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered legal advice. While we strive to keep the information accurate and up to date, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained on the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. For specific legal advice tailored to your situation, please contact a qualified legal professional.
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