The business-legal world is full of idioms. Whether you are learning the ropes, or have been working in business for a long time, you will encounter certain phrases from time to time that you might be unsure about. A ‘Golden handshake’ might be one of those. In this article, we’ll explain what a golden handshake is and how it works in employment law.
In a nutshell, a ‘golden handshake’ is a clause in an employment contract. The clause generally outlines conditions of severance packages if employees lose their job through firing, restructuring, or even scheduled retirement. In addition to these clauses, these are some important legal considerations to make in the event of termination:
- Whether you will need a deed of release
- How much notice is required and whether you’re willing to pay out that notice in lieu of your employee working it
Who is Eligible?
Golden handshake clauses may be put into any employment agreement. However, these clauses are more likely to be found in senior employees, executive, or directors’ contracts.
What Does This Include?
Whilst there is no definitive structure to the golden handshake, the clause may likely include the following provisions:
- A long fixed-term contract giving rise to damages in the event of early termination.
- Payment of a fixed sum in the event of employer repudiation or non-renewal of a contract.
- The option to resign and claim a fixed sum in the event of a change of control of the company because of a takeover.
What Are the Implications?
Although it might be all of one clause in your employment contract, a golden handshake may incur a broad number of other consequences. It is very important that you make sure this clause does not create issues with other components of your employment agreement. Consider the following things in the negotiation of any golden handshake clauses:
- Restraint of trade.
- Accrued annual and long service leave.
- Outstanding remuneration.
- Balance of superannuation contributions.
- Tax implications may arise as a result of any severance payments.
More information on employment termination can be found on the Australian Government Fairwork Ombudsman website. If you are unsure about what your rights and responsibilities are in respect of the golden handshake, it may advisable to seek assistance from a contract or employment lawyer.
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