If you are an employee there are usually two situations which give rise to a settlement agreement. These are when:
- An employee approaches the employer as he wants to leave the company
- The employer approaches the employee as it wants the employee to leave
WHAT IS A SETTLEMENT AGREEMENT?
A settlement agreement (previously known as a compromise agreement) is a legally binding contract between an employee and an employer where the employee is signing away his legal rights to pursue a claim.
In exchange, the employer promises various payments usually in excess of the payments to which the employee is legally entitled. Settlement Agreements can be used to end an employment relationship, to settle disputes whilst still employed or to settle claims already issued at the Employment Tribunal.
WHAT DO YOU HAVE TO REMEMBER?
In order for a settlement agreement to be binding the terms of the agreement:
- Must be in writing
- It must relate to a particular complaint/dispute
- You must receive advice from a suitably qualified lawyer or an authorised member of a trade union (who is identified in the settlement agreement), who needs to confirm that a contract of insurance in relation to the advice exists.
Strictly speaking, most solicitors can assist by providing outline advice on the terms of a Settlement Agreement and sign. However, solicitors who specialise in employment law can give expert advice on the full effect and meaning of the typical terms found in settlement agreements and importantly, your legal position which may result in negotiating a larger financial severance package. Employers will typically pay as little as they can in the hope that employees will be more concerned with not having to incur legal fees to the detriment of potentially securing many thousands more than offered.
We are highly experienced in employment law and are able to provide expert settlement agreement advice. We have negotiated the sums offered by employers many hundreds of times, securing increases of tens of thousands in many cases.
DO YOU NEED HELP WITH A SETTLEMENT AGREEMENT?
Then get in touch with us for a no cost, open discussion about your requirements
COMMON SETTLEMENT AGREEMENT FAQS
We aim to agree on terms of a settlement agreement as quickly as possible. The circumstances leading to a Settlement Agreement are different for everyone but it may be possible to advise you and confirm our advice by signing the settlement agreement the same day that you instruct us.
Yes! If you are unhappy with the terms of the settlement agreement, we can help negotiate a better package. Throughout the years, we have negotiated an increase on many hundreds of settlement agreements, many by tens of thousands of pounds.
Compensation sums up to £30,000 can usually be paid tax-free, but there are some situations where sums less than £30,000 may be taxable.
For example, if the sums offered constitute contractual payments i.e. wages, contractual pay in lieu of notice or holiday pay. If the employee prefers, any taxable payment can often be diverted to a pension fund, free of tax.
You may find it beneficial to take expert guidance on the tax treatment of the payments you are due to receive.
Every settlement agreement is different but it is common that employers will want the terms and sums of money paid to remain confidential between you and them.
As a general rule the aim of a settlement agreement is to settle a particular issue (e.g. redundancy or a dispute); however, most employers will also want satisfaction that you will not pursue any other claims against them (particularly if your employment is terminating).
There are some claims that cannot be waived via a settlement agreement and it is common that accrued pension rights and unknown personal injury claims are not waived.
If the settlement agreement is to terminate your employment then it is common to agree on a reference.
Almost all Settlement Agreements include a clause which states that your employer will make a contribution towards the employee’s legal fees for meeting with a solicitor to be fully and properly advised as to whether the offer made by your employer is a fair offer. The employee is signing to say they have disclosed all the facts and the solicitor is signing to say that they have fully advised the employee based on the facts disclosed.
If substantial negotiations on sums and terms are required, the cost may be more than the contribution your employer offers to pay.
However, where the terms and facts are relatively straightforward and negotiations for a higher sum are not necessary, it may be possible to advise employees keeping the cost within the employer’s contribution of legal fees which means that in such situations we may be able to advise employees for free.
If the sum offered by your employer is not sufficient we will inform you and we can often negotiate an increase in the contribution made by your employer.
Settlement Agreements vary in complexity. Settlement Agreements offered to more senior executives or Settlement Agreements involving more complex financial packages usually involve some form of negotiation. As specialist settlement agreement and employment law solicitors, we can help you receive the best possible outcome, wherever you are in the UK.
INTERESTED IN FINDING OUT MORE?
Then contact one of our specialist employment solicitors to see how we can help