A severance agreement is a common agreement between an employer and a terminated employee that settles what the employee is entitled to. By law, an employer must provide basic severance, such as vacation and sick time pay, the handling of extended health care (at your expense), payment for commissions earned and payment for the hours you have worked. A severance agreement can provide for how long a company will continue to pay you, how much a company will pay you, how long you will be covered under company health and life insurance and what will happen with your 401k, Roth or other Pension Plan. A severance agreement can also provide for a positive letter of recommendation from the employer and assistance in job placement. Whatever the agreement may ask for, be sure to read it carefully, and be sure it is not a release of liability in the event you are being illegally terminated, such as for age, race or sexual discrimination.