Executive departures are a normal part of corporate life. Whether you’re stepping down after a major transformation, the business is pivoting, or the board wants a reset, a well-structured golden handshake can protect your interests, recognise your contribution and support a smooth transition for everyone involved.
This guide breaks down what a golden handshake means in Australia, what it can include, how payments are typically structured and taxed, the key Australian laws that apply (including the Corporations Act termination benefits rules), and the clauses and documents you’ll want to get right. We’ll also share practical negotiation tips so you can approach discussions with clarity and confidence.
What Is A Golden Handshake In Australia?
A “golden handshake” is an executive severance package offered when an executive’s role ends, usually at the employer’s initiative or as part of a managed transition. It’s designed to compensate you for leaving and to finalise the employment relationship cleanly, with clear terms on pay, restraints, confidentiality and the handover.
Think of it as a bundle of components rather than a single payment. While headlines often focus on a big lump sum, most executive exits are a mix of contractual entitlements, discretionary amounts, incentive outcomes and agreed behaviour (such as non-disparagement and cooperation during handover). These are usually tied together in a settlement deed so both sides have certainty.
It’s also separate from your minimum entitlements. Any package should first account for what you’re already owed under your contract and Australian law-like accrued leave and notice or payment in lieu of notice-and then layer any additional, negotiated benefits on top.
What Can A Golden Handshake Include?
Every arrangement is different, but most executive severance packages are built from similar parts. Here’s a practical checklist of components that often appear, so you can identify your priorities.
1) Contractual Entitlements
- Accrued but unused annual leave and long service leave (where eligible).
- Notice or payment in lieu of notice in line with your contract and applicable law.
- Any contractual or earned bonuses (subject to plan rules and performance conditions).
2) Ex Gratia (Goodwill) Payments
These are discretionary amounts paid on top of what’s strictly owed. They can recognise your contribution, compensate for restraints you agree to, or help resolve disputed entitlements. It’s useful to understand how ex gratia payments are assessed, documented and communicated.
3) Equity And Incentives
- Vesting of unvested options or restricted stock units (RSUs), or extending exercise windows-always check plan rules and board discretions. If equity is on the table, revisit how RSUs and other incentives are treated on cessation.
- Performance rights and deferred bonuses (often pro‑rated to the exit date if the plan allows).
4) Benefits And Supports
- Continuation of insurance or health benefits for a defined period.
- Outplacement support, executive coaching, or an agreed reference format.
- Short-term retention of work devices or a company vehicle (with clear IP, privacy and data-wiping protocols).
5) Transition, Restraints And Conduct
- Agreed handover deliverables, advisory time or a limited consulting retainer.
- Clarity on restraint scope and duration (non-compete, non-solicit, confidentiality)-specialist restraint of trade advice is valuable here.
- Mutual non‑disparagement commitments and agreed announcements.
- Placement on garden leave for some or all of the notice period to protect the business while pay and benefits continue.
6) Settlement, Release And Finality
Executive packages are usually wrapped up with a settlement deed containing a broad release of claims by both sides. A carefully drafted Deed of Release confirms the payments, addresses confidentiality and announcements, and sets out return-of-property and cooperation obligations.
How Are Golden Handshakes Structured And Taxed?
In Australia, executive severance is commonly structured as a combination of minimum entitlements, discretionary payments and incentive outcomes. To avoid confusion, the settlement deed should list each component clearly, when it will be paid, and any conditions attached.
Payment Timing And Conditions
- Staged payments may be tied to key milestones-such as completion of handover, the end of garden leave, or ongoing compliance with restraints, confidentiality and cooperation clauses.
- Equity outcomes follow plan rules and board discretions. Ensure any board decisions are documented (e.g. board minutes) and mirrored in the deed.
High-Level Tax Considerations
Different components can be taxed differently. For example, employment termination payments (ETPs) are treated differently to accrued leave payouts or equity outcomes. Superannuation generally isn’t payable on most termination amounts, but there are exceptions-review the rules around superannuation on termination payments early so there are no surprises.
Personal tax treatment depends on your circumstances (and may also depend on how components are characterised in the deed). We don’t provide tax advice at Sprintlaw. It’s important to obtain independent tax advice to confirm the treatment and timing that best fits your situation before you sign.
Which Laws Apply To Executive Severance In Australia?
Executive exits sit at the intersection of employment law, contract law, corporate governance and incentive plan rules. Here are the key legal touchpoints to consider in Australia.
Employment And Contract Law
Your executive employment contract drives much of the analysis. It will set the baseline for notice, bonus eligibility, post‑employment restraints, intellectual property obligations and confidentiality. Company policies and plan rules (short‑term and long‑term incentives) can modify or limit entitlements, so include them in your review.
Fair Work And Minimum Entitlements
Even at senior levels, employers must meet minimum obligations such as paying out accrued leave correctly and following lawful termination processes. Where redundancies are involved, ensure the process aligns with policy and law, and factor in minimum entitlements before adding any discretionary payments.
Corporations Act Termination Benefits Rules (ss 200A–200J)
For directors and certain senior executives of companies regulated by the Corporations Act 2001 (Cth), “termination benefits” are subject to specific rules under sections 200B–200J. In broad terms:
- There is a cap on termination benefits (commonly referred to as the “12‑month average base salary” cap) that can be paid without shareholder approval. The calculation and who it applies to are technical-boards should obtain advice and run the numbers carefully.
- If the proposed benefits exceed the cap, prior shareholder approval is generally required. Without that approval, excess benefits can’t be paid.
- These provisions capture more than just cash-equity acceleration, deferred bonuses and certain post‑employment benefits can be “termination benefits” depending on the facts and the relevant plan rules.
It’s important to factor these Corporations Act requirements into your timeline. If shareholder approval is needed, build this into the exit process early so communications and payments are lawful and on schedule.
Post‑Employment Restraints
Non‑compete and non‑solicit clauses must be reasonable in scope, geography and duration to be enforceable. If your package proposes to extend or vary restraints, scrutinise the drafting and consider whether compensation is tied to any extended restraint period. Getting targeted restraint of trade advice can make a practical difference to enforceability.
Confidentiality, IP And Privacy
Settlement deeds typically reaffirm confidentiality, intellectual property and privacy obligations. Make sure there’s a workable process to return devices and documents, wipe or transfer data, and confirm that any permitted use (for example, keeping non‑confidential copies of public speeches or achievement summaries) is clearly allowed.
Settlement, Releases And Announcements
Most negotiated packages include a broad mutual release of claims, balanced non‑disparagement and agreed announcement wording. If the arrangement includes consulting or continued cooperation after exit, this can be captured in the deed or a short consultancy addendum so expectations are clear.
Negotiation Strategy And Essential Documents
A fair, defensible package is built on clarity, evidence and a solution mindset-and the paperwork to match. Use the checklist below as a starting point for negotiation and documentation.
Start With The Contract (And Plan Rules)
Map what’s strictly owed under your executive agreement and incentive plans, what’s discretionary, and what needs board approval. This anchors expectations on both sides and helps you structure a package that is robust and compliant (including with the Corporations Act cap and any shareholder approval steps).
Prioritise What Matters Most
Identify your top priorities-equity treatment, restraint clarity, or the timing of payments-and be open about trade‑offs. For example, you might accept a lower ex gratia amount in return for clarified restraints, accelerated vesting, or a longer option exercise window under the plan rules.
Align Payments To Clear Conditions
Linking part of the discretionary amount to successful handover, or to ongoing compliance with restraints and confidentiality, can give the board comfort while ensuring you’re recognised for cooperation. Where there is a complex backdrop, a staged Deed of Release with milestone payments can keep both sides focused on completion.
Keep Governance Tight
Confirm board approvals, any disclosure obligations and policy requirements before announcements go out. If you’ll be held on garden leave, clarify duties, access to systems and practical handover expectations so the transition is achievable.
Core Documents And Clauses To Get Right
- Settlement Deed (Deed of Release): Sets out payments, timing, conditions and tax treatment; includes mutual releases, confidentiality, non‑disparagement, cooperation and return‑of‑property provisions; can attach announcement wording or a reference letter.
- Employment Contract And Plan Rule Alignment: Ensure the deed aligns with the employment contract, bonus and LTI rules, and any board resolutions; confirm whether good‑leaver provisions apply and how pro‑rating or vesting is determined.
- Restraints And Conduct: Define scope, geography and duration; ensure reasonableness; include measured cooperation obligations (e.g. limited availability to assist in litigation) with fair parameters.
- Payment Mechanics: Break down components (notice, payment in lieu, ex gratia, incentives) with specific dates or milestones; confirm payroll processing and superannuation treatment in light of termination payment superannuation rules.
- Restraint‑Related Consideration: If restraints are extended or tightened, consider linking a defined portion of the discretionary payment to the restraint period so the drafting and consideration line up.
When To Get Help
Executive exits can move quickly and involve multiple moving parts-contracts, plan rules, board approvals and the Corporations Act termination benefits cap. If you want support reviewing your deed, confirming restraint settings, or aligning payment mechanics with your entitlements and plan rules, our team can help you structure a clean, compliant deal. Where tax outcomes are a priority, engage an independent tax adviser in parallel so your legal and tax positions work together.
Key Takeaways
- A golden handshake is a negotiated executive severance package that sits on top of your minimum entitlements and is usually documented in a settlement deed.
- Common components include contractual entitlements, discretionary ex gratia payments, incentive outcomes, benefits, garden leave and clear restraint/confidentiality terms.
- For many companies regulated by the Corporations Act, termination benefits may be capped (often at 12 months’ average base salary) unless shareholders approve a higher amount-factor ss 200B–200J into your planning.
- Spell out payment mechanics with precision-separate notice, payment in lieu, equity and bonuses-and confirm the superannuation treatment of each component.
- Restraints must be reasonable to be enforceable; refine scope and duration and consider linking restraint commitments to appropriate consideration.
- A strong Deed of Release, alignment with your employment contract and plan rules, and tight governance (including any shareholder approval) will reduce risk and protect reputation.
If you’d like a consultation on negotiating or documenting a golden handshake, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
