Settlement Agreements
Advice for employees
What to do next if you've been offered a settlement agreement by your employer
You may be leaving an organisation through your own choice, or perhaps you are being made redundant but have been offered an enhanced severance package.
Sometimes a settlement agreement is offered to an employee as an alternative to going through uncomfortable formal procedures such as performance management or disciplinary. It may come out of the blue or you may be expecting it, particularly if there has been a breakdown in relationships at work.
Whatever the reasons behind suggesting your departure, amicable or less so, many employers will require you to sign a Settlement Agreement (previously called a ‘Compromise Agreement’) in order to receive the severance payments they are offering.
We can help you review what you are being offered, renegotiate a better package, and give you confidence you are making the best choice for you.
Make an EnquiryWhat Is A Settlement Agreement?
A Settlement Agreement is an optional contract (that becomes legally binding once signed) that is used to resolve a dispute between an employer and an employee. It usually involves the employee agreeing to leave their job, obey certain conditions (such as keeping information confidential) and waive some legal rights in return for a compensation payment. However, it can also be used to resolve grievances or similar issues, in which case the employee will have to agree to drop any pursuit of their claim in order to receive the payment. You do not have to sign a Settlement Agreement, but once you do it is legally enforceable.
Because Settlement Agreements involve you waiving your rights to pursue most legal claims against your employer now or in the future it is important to get expert legal advice at the earliest opportunity. For a settlement agreement to be legally binding, it’s a requirement that you receive independent legal advice on it.
We are specialist employment solicitors with extensive experience of advising employees on Settlement Agreements and well placed to provide you with clear and reliable advice on what you are being offered.
It is the norm for the employer to pay the costs for you to be legally advised on the Agreement, so it is worthwhile making sure you access the best quality specialist advice. Call us on 0117 290 0905 or use our online enquiry form if you need help reviewing a Settlement Agreement.
Contact UsI needed urgent help with a Settlement Agreement and have been surprised at the speed and efficiency of your staff. From the receptionist and then Alex and especially Sonia, you have truly been fantastic and have resolved the issue for me quickly and in a positive manner. Sonia blew me away! She was friendly, quick to grasp the issue, precise, humorous and generally brilliant. I really am so impressed with her; I'm just annoyed I don't have any more issues to resolve so I can again be awestruck with her professionalism and control. Thank you Patch Law, thank you Sonia!
Senior Education Manager
Bristol
What To Do If Offered A Settlement Agreement
Here's the first things you should consider if your employer offers you a Settlement Agreement. If you need more advice, please get in touch with us.
How much will legal advice cost?
You decide how much input you need from us, so you can always keep control of the budget.
If you are happy with the deal being offered, only require the standard mandatory advice on the terms and effect of the agreement and the advice call is not lengthy, your total legal costs may be covered by your employer’s contribution. Please note, however, that we cannot guarantee this, as some factors which incur time (such as the efficiency of HR) are outside of our control.
Alternatively, you may require a fuller discussion of your employment circumstances which may include an assessment of the fairness of the deal offered and/or our advice for suggested amendments to the drafting of the Agreement and/or that you are well protected through a fair Agreement. In such cases, please note that depending on the level of the employer’s contribution and the complexity of your situation, this advice will require more time and therefore is unlikely to be covered in full by your employer’s contribution. In this event we will ask you to pay the amount over and above the employer’s contribution. At all times we will work swiftly and efficiently to minimise your costs and make the process as low stress as possible.
Should I accept the offer?
If you can provide us with a copy of your contract of employment and a recent payslip as well as the Settlement Agreement, we can help you check that payments such as notice pay, accrued holiday pay and statutory redundancy pay (if applicable) are correct.
The compensation payment (sometimes called the Termination Payment or Ex Gratia Payment) is an additional sum (free of income tax and NIC deductions up to £30,000) paid to you in exchange for you giving up your rights to bring claims against your employer. Assessing whether this is reasonable is where our experience and expertise come into their own. Compensation payments range from little more than nominal to six figure sums. How much should be acceptable will depend on many variables such as:
The reason for the termination of your employment, e.g. redundancy, conduct, performance, sickness absence
Your salary and seniority
Your length of service and your record during that time
The merits and value of any potential claims you may have against your employer
Your (and your employer’s) appetite for risk.
We will take the time to talk you through your options to enable you to make the best decision for your way forward.
Case Study
Checking the details
"Our client was happy with the settlement terms offered when they contacted us, and initially thought we only needed to ‘sign it off’. However, upon reviewing the document, we were quickly able to see that, although the compensation payment appeared reasonable, the company had overlooked other entitlements.
Payment for unused holiday had been omitted and notice pay under-calculated: our client’s contract stated one month, but due to her 10 years’ service she was entitled to 10 weeks’ notice pay. We were also able to have a full and positive reference, drafted by our client, inserted into the agreement, meaning our client could rely on this being provided to any prospective employer."
Negotiating A Settlement Agreement
You don't have to accept a Settlement Agreement, and our experienced team of solicitors can help you renegotiate or reject an offer that doesn't feel fair.
Renegotiating the Agreement
If you decide that you do not wish to accept the terms offered by your employer we have an excellent track record of acting on a client’s behalf to renegotiate the financial compensation and/or other termination arrangements. We will endeavour to keep your legal costs to a minimum and act as swiftly and efficiently as possible. We frequently succeed in obtaining an increase in the employer’s contribution to your costs, so as to minimise and sometimes eliminate costs payable by you.
Consider More Than Money
The payments are of key importance of course, but there are other factors which are important to consider for inclusion in the agreement. Settlement Agreements need to state everything you wish to be able to rely on your employer doing or not doing – as other agreements made (whether contracts, emails or conversations) are very unlikely to be enforceable after the Settlement Agreement is signed.
There is no general legal requirement for an employer to provide an employee with a reference. With satisfactory references being a standard condition on recruitment to a new role, it is important to consider what you need from your former employer, and ensure agreed wording is included in the Settlement Agreement.
Other agreed wording which is also quite frequently included on the employee’s request are internal and external announcements about your departure.
It is important to look forward to your likely next career move. Your old employer may include restrictive covenants in the draft agreement, either re-stating those in your contract of employment, or imposing new ones. We can advise you on the implications of these, their enforceability and renegotiate if necessary.
Handling Negotiations
As well as advising employees on a settlement agreement proposed by their employer, we are also experienced in judging when and how to open negotiations, either directly on your behalf or advising you on initiating a ‘without prejudice’ conversation. This enables both parties to explore – off the record - an alternative to a contentious route.
Case Study
Ensuring a fair process
"Having been side-lined for some time, our senior management employee client anticipated that he was likely to be selected for redundancy and sought advice from us at an early stage. It emerged from our focussed questions that our client had evidence of strong performance over a number of years. However, he was older than his peers and others were not being excluded from key work activities in the same way.
We were able to advise him on how to deal with a line management meeting which became the beginning of an accelerated redundancy consultation process in which he was the only employee placed at risk of redundancy. Armed with our advice on the requirements on an employer to dismiss fairly for redundancy, our client was able to challenge it in many respects. Having assessed the merits and significant value of his potential claims, we then wrote to the employer on our client’s behalf which was the beginning of a successful negotiation resulting in a settlement agreement severance package for our client of more than £80,000."
Objective and clear advice
When you are in a contentious situation, you don’t need a cheerleader. Our assessment of your case will be objective and realistic. We are also experienced in advising employers of all types and sizes on all aspects of employment law, including settlement agreements. This gives us a balanced perspective on your case – our experience of the tactics and priorities of ‘the other side’ can significantly strengthen your negotiating position.
Advising on Settlement Agreements is the most common request we receive from employees. Our knowledge and experience enables us to navigate a document which may look complex and turgid to you, look for essential points, explain it to you clearly without legalese and provide you with clear advice and recommendations.
For expert advice on all aspects of Settlement Agreements from our specialist employment law solicitors, please either call us on 0117 290 0905 or complete a No Obligation Enquiry using the form below and we will soon be in touch with you.
Make an Enquiry
Fill out our online enquiry form, or call us on 0117 290 0905 to get fast, clear and practical legal advice, tailored to your situation.
