Frequently Asked Questions
If you have a question about your settlement agreement, you will likely find a quick answer below. Please do not hesitate to contact me about your settlement agreement for specific, tailored advice, 100% free of charge.
Answers To Your Questions About Settlement Agreements
The FAQs below capture most of the questions I get asked about settlement agreements. Click on the + to reveal a quick answer to the question. The “Learn More” button at the end of each short answer will take you to an article giving a deep-dive answer to the question.
Further down this page you will find FAQs about me, Geoffrey Caesar, and my processes.
If you have a question which is not answered here, please do not hesitate to contact me.
A Settlement Agreement is a legally binding contract between an employer and an employee that allows both parties to end their employment relationship on agreed terms. Under this agreement, the employee waives certain legal claims against the employer (e.g., unfair dismissal or discrimination) in exchange for financial compensation. Key features include independent legal advice (required for validity), confidentiality clauses, and mutual agreement from both parties. Governed by the Employment Rights Act 1996, these agreements are customised to each situation, offering a fair, amicable resolution without needing an Employment Tribunal.
A settlement agreement can be the right choice if you’re seeking a fast, private, and controlled resolution to an employment dispute. Unlike a tribunal, which can be lengthy and unpredictable, a settlement agreement provides certainty, allowing you to negotiate specific terms (like financial compensation, references, and confidentiality). It’s often ideal for those wanting a less stressful, more secure way to move on, with financial stability and tailored outcomes. However, if you’re focused on principle or a public ruling, a tribunal may be preferable.
The amount you’ll receive under a settlement agreement depends on several factors:
- Statutory Redundancy Pay: Based on age, service length, and weekly pay.
- Pay in Lieu of Notice (PILON): Compensates you for your notice period if the employer wants you to leave immediately.
- Compensation for Loss of Office: Reflects factors like service length, benefits, and job market outlook.
- Employment Claims: Strong claims for issues like unfair dismissal may increase the settlement offer.
- Other Negotiable Elements: Positive references, tax efficiency, and confidentiality clauses can also be included.
Each case is unique, and the final amount combines these factors to provide a fair and tailored settlement.
Non-financial benefits in a settlement agreement can be just as valuable as financial compensation. Key non-financial benefits often include:
- Agreed Reference: A pre-written document controlling what a former employer says about your departure.
- Confidentiality and Non-Disparagement Clauses: Protects your reputation by ensuring details about your departure remain private and both parties avoid negative comments.
- Retention of Benefits: Allows you to temporarily keep perks like a company car or private healthcare.
- Outplacement Support: Offers career coaching or retraining to help you transition to a new role.
- Public Statements and Apologies: For senior roles, you might negotiate a joint public statement or even a formal apology for emotional closure.
These benefits can shape your career and offer peace of mind, ensuring your interests are protected long-term.
A settlement agreement offers a guaranteed payment, usually within 14-28 days, often around three to six months’ pay. This provides certainty and quick resolution. In contrast, a tribunal award can sometimes offer higher compensation, especially for strong claims, but it’s less predictable. Tribunal cases can take 12-24 months or more, and there’s risk involved—you only receive payment if you win, and appeals or employer solvency could further impact the outcome. A settlement agreement is generally faster and more certain, while a tribunal may yield a higher payout with additional time and risk.
To get independent legal advice on your settlement agreement, you have a few options, but a specialist solicitor in settlement agreements is often the best choice. By law, your employer must ensure you receive independent advice to make the agreement binding. While trade union advisers, voluntary sector advisers, and some legal executives can provide this advice, a specialist solicitor offers expert knowledge, tailored negotiation skills, and complete protection of your rights. They can also help ensure your agreement complies with current laws and is fair to your interests.
The amount you’ll receive under a settlement agreement depends on several factors:
- Statutory Redundancy Pay: Based on age, service length, and weekly pay.
- Pay in Lieu of Notice (PILON): Compensates you for your notice period if the employer wants you to leave immediately.
- Compensation for Loss of Office: Reflects factors like service length, benefits, and job market outlook.
- Employment Claims: Strong claims for issues like unfair dismissal may increase the settlement offer.
- Other Negotiable Elements: Positive references, tax efficiency, and confidentiality clauses can also be included.
Each case is unique, and the final amount combines these factors to provide a fair and tailored settlement.
If you’ve received a settlement agreement, here’s what to do next:
- Contact a Solicitor: Seek independent legal advice right away; it’s required by law for the agreement to be valid. Often, your employer covers this cost.
- Check Deadlines: Act quickly, as most agreements have a short timeframe. A solicitor can help secure an extension if needed.
- Don’t Rush or Feel Pressured: Take time to fully understand the terms and consult your solicitor.
- Keep It Confidential: Avoid discussing the agreement with colleagues, as confidentiality is often required.
- Consider Long-Term Impact: Review non-financial terms like references and restrictive clauses with your solicitor.
For expert guidance, reach out to a settlement agreement specialist to ensure your interests are protected.
It depends. Some parts of a settlement payment can be tax-free, up to £30,000. This tax-free allowance applies to non-contractual payments, like redundancy pay or compensation for loss of employment. However, any contractual payments—such as unpaid salary, holiday pay, bonuses, and payments in lieu of notice (PILON)—are taxable.
If your non-contractual settlement payment exceeds £30,000, the excess will be subject to income tax. For guidance on maximizing tax efficiency in your settlement agreement, consulting a solicitor is recommended to avoid unexpected tax costs.
Since April 2018, all PILON payments are fully taxable, regardless of whether they are explicitly stated in your contract. These payments, which compensate for your notice period without requiring you to work through it, are treated as regular earnings and subject to income tax and National Insurance.
However, other non-contractual termination payments—like redundancy pay or ex-gratia payments—can still qualify for the £30,000 tax-free allowance. For clarity on tax implications in your settlement agreement, consulting a specialist solicitor is recommended.
A settlement agreement typically waives claims like unfair dismissal, discrimination, redundancy pay, and unpaid wages. However, some rights cannot be waived, including unforeseen personal injury claims, accrued pension rights, and claims arising after the agreement is signed. Independent legal advice is required by law to help you understand what you’re waiving and ensure the terms are fair.
Yes, age can influence your settlement sum. For employees near retirement, finding new work can be more challenging, which may justify a higher settlement. Age can also factor into claims for age discrimination or redundancy pay, which increases with age and length of service.
Pensions are another consideration—early dismissal may affect retirement benefits, potentially leading to additional compensation. For younger employees, the settlement may reflect quicker job prospects, but other factors (like discrimination or personal circumstances) could increase the sum. Consult a solicitor to ensure your age and unique situation are fairly considered.
Yes, your salary significantly impacts several components of a settlement agreement:
- Statutory Redundancy Pay: Calculated based on weekly pay, though capped.
- Enhanced Redundancy Payments: Often based on your salary, especially in senior roles.
- Pay in Lieu of Notice (PILON): Directly reflects your salary and notice period.
- Compensation for Loss of Office: May consider salary-based perks like bonuses or commissions.
- Legal Claims: Higher earners may have stronger claims for financial loss, adding negotiation leverage.
Your salary forms the foundation of many settlement elements, so consulting a solicitor ensures you’re fairly compensated.
Yes, you can negotiate a settlement agreement after leaving your job. Many people choose to settle post-termination to avoid the time, cost, and uncertainty of a tribunal. A post-termination settlement can cover a final payment, agreed reference, confidentiality, and waiver of claims.
If settlement negotiations don’t yield a fair offer, you can still pursue a tribunal claim, though keep in mind the three-month filing deadline. Seeking legal advice is essential to assess your claim’s strength and ensure you receive the best possible outcome.
If your employer won’t negotiate on settlement terms, there are still steps you can take:
- Assess the Offer: Review the initial terms with a solicitor to determine if they’re fair based on your situation.
- Build a Case: With legal support, you can highlight any potential claims (e.g., unfair dismissal, discrimination) or mutual benefits that could encourage the employer to reconsider.
- Explore Alternatives: Options include filing a formal grievance, using ACAS conciliation, or considering an Employment Tribunal claim if the offer isn’t sufficient.
- Review Options Carefully: If negotiation isn’t possible, weigh the benefits of the existing offer against the risks of pursuing a tribunal.
A solicitor can help you decide the best course of action to protect your interests.
Typically, no. By signing a settlement agreement, you agree to waive most employment-related claims (like unfair dismissal or discrimination) in exchange for compensation or other benefits. However, there are some exceptions:
- Personal injury claims that you weren’t aware of at signing are usually not covered.
- Pension rights cannot be waived.
- Future claims for events occurring after the agreement is signed can still be pursued.
Independent legal advice is required before signing, ensuring you understand what claims you’re waiving. If you have doubts about your agreement’s terms, consult a solicitor for clarity.
A settlement agreement can influence future job opportunities in several ways:
- Confidentiality and Non-Disclosure: You typically can’t discuss the terms of your agreement, but this doesn’t prevent you from sharing relevant job experience with future employers.
- Agreed Reference: Many agreements include an agreed reference, allowing you to control how your previous role is presented to potential employers.
- Non-Disparagement Clauses: Both parties agree not to speak negatively about each other, helping to protect your reputation.
- Non-Compete Clauses: Some agreements may restrict you from joining competitors for a period, so review these carefully.
Handled professionally, a settlement agreement shouldn’t impact your career negatively.
Restrictive covenants are clauses that limit what you can do after leaving an employer, typically including:
- Non-compete clauses: Prevent working for direct competitors.
- Non-solicitation clauses: Restrict contacting former clients or colleagues.
- Confidentiality clauses: Prohibit sharing proprietary information.
If these were part of your original contract, they may still apply after a settlement agreement, but you can often negotiate them for shorter durations or narrower scope. For a covenant to be enforceable, it must be reasonable in duration and scope. Consulting a solicitor can help ensure these restrictions don’t unfairly limit your future career.
The redundancy consultation process is a legal requirement designed to ensure fairness in redundancy decisions. A fair consultation allows for meaningful discussions and alternatives, which can help set expectations for your settlement amount.
If the consultation process was flawed or rushed, you may have grounds to negotiate a higher settlement. Common issues include insufficient notice, lack of genuine consultation, or inadequate reasons for redundancy. In these cases, employers may offer additional compensation to avoid potential claims.
If you believe the consultation was unfair, consult a solicitor—they can help assess the process and strengthen your settlement negotiation or advise on pursuing an unfair dismissal or discrimination claim if needed.
Being on a PIP can affect your settlement negotiations and the terms offered, as employers often view a PIP as a formal step toward dismissal if performance doesn’t improve. Here’s how it can impact your settlement:
Legal Advice: Consulting a solicitor can help assess the fairness of the PIP and strengthen your negotiation strategy, ensuring the best possible outcome.
Negotiation Leverage: Since a PIP can lead to termination, initial settlement offers may be lower. However, you can still negotiate if there are issues with the PIP’s fairness, your performance history, or lack of support.
Settlement Terms: Employers may offer pay for your notice period (PILON) and a neutral or agreed reference, which can help with future employment.
Risks of Declining a Settlement: If you decline and fail the PIP, the employer may dismiss you on performance grounds, affecting future negotiations.
‘Without prejudice’ is a legal term used in settlement discussions to protect certain conversations and correspondence from being used as evidence in court or tribunal proceedings. It applies when both parties are involved in a genuine attempt to resolve a dispute. This allows for open and honest communication about settlement terms without the risk of those discussions being used against either party if negotiations fail.
Using ‘without prejudice’ helps avoid admissions of liability, encourages negotiation, and allows both sides to explore options freely. However, not all statements are automatically protected—only those related to settlement discussions. Consulting a solicitor can help you navigate ‘without prejudice’ communications and protect your rights during settlement negotiations.
A protected conversation allows employers and employees to discuss ending employment on agreed terms confidentially, without the conversation being used in future unfair dismissal claims. Unlike ‘without prejudice’ discussions, protected conversations don’t require an existing dispute and specifically protect against unfair dismissal claims—but not against claims like discrimination or whistleblowing.
‘Without prejudice’ applies when a genuine dispute exists and can cover a broader range of claims. Often, employers label discussions as both ‘protected’ and ‘without prejudice’ to ensure confidentiality in various scenarios. Legal advice can help clarify rights and ensure these discussions are fair and properly handled.
Yes, employers often set a deadline for accepting a settlement offer, usually ranging from 7 to 21 days. This timeframe allows the employee to review terms and seek independent legal advice, which is legally required for a binding agreement.
If you need more time, you can request an extension from the employer, especially if you’re waiting to meet with a solicitor. Missing the deadline can mean losing the offer, so it’s essential to act promptly. Consulting a solicitor ensures you fully understand the offer, any waived rights, and whether the terms are fair before the deadline passes.
If your employer breaches a settlement agreement—such as by failing to make a payment, not providing an agreed reference, or breaking confidentiality—you have options to address it. Here’s what to do:
- Review the Agreement: Confirm the specific terms to ensure a breach has occurred.
- Communicate with the Employer: Contact them in writing to request they rectify the issue.
- Seek Legal Advice: A solicitor can help you understand your options, including possible remedies or legal action.
- Legal Action: If necessary, you can file a breach of contract claim, potentially seeking financial compensation, specific performance (requiring the employer to fulfill the agreement), or mediation.
A solicitor can guide you through these steps to help secure the terms you’re entitled to.
The timeline for reaching a settlement typically ranges from 2-4 weeks for straightforward cases, though more complex situations can take longer. Here’s a breakdown:
- Initial Discussions and Offer: Often takes a few days to a couple of weeks as the employer proposes terms and the employee reviews.
- Reviewing the Offer and Legal Advice: Typically 1-2 weeks to consult a solicitor and consider the terms.
- Negotiation: This stage varies widely—some cases conclude in a few days, while more complex negotiations can take several weeks.
- Finalizing and Signing: Usually completed within a few days once terms are agreed.
- Payment and Implementation: Most employers fulfill payment and other terms within 2-4 weeks of signing.
Factors like the complexity of the case, willingness to negotiate, and availability of legal counsel can impact the timeline. Consulting a solicitor early helps ensure the process runs smoothly and efficiently.
The typical timeframe for payment under a settlement agreement is usually 14 to 28 days after signing, although some employers may pay in the next payroll cycle. The specific timeframe will be stated in your settlement agreement, and it’s essential to review this carefully.
If payment is delayed, you should first reach out to your employer’s HR or legal department for clarification. If the issue isn’t resolved, your solicitor can help enforce the agreement. In cases of persistent non-payment, legal action may be an option to recover the owed amount.
Yes, a settlement agreement can cover much more than just financial compensation. Common non-financial terms you can negotiate include:
- Agreed References: Ensuring a positive or neutral reference to protect your reputation.
- Confidentiality & Non-Disparagement: Clauses to keep the terms private and prevent negative comments.
- Outplacement Support: Services like career counseling and job search support to ease your transition.
- Restrictive Covenants: Adjusting non-compete or non-solicitation terms to keep them fair.
- Benefits Continuation: Extending health insurance, pension contributions, or other perks temporarily.
- Removal of Records: Expunging any disciplinary records or performance issues from your file.
- Apology or Statement of Regret: A written acknowledgment from the employer, especially in cases of unfair treatment.
Consulting a solicitor can help you negotiate these terms to ensure a comprehensive agreement that supports your financial and professional future.
IA settlement agreement and redundancy pay are different concepts.
- Redundancy Pay: This is a statutory entitlement for employees whose roles are genuinely redundant. It provides financial support based on age, length of service, and weekly pay, and is usually tax-free up to £30,000. No waiver of rights is required to receive redundancy pay.
- Settlement Agreement: This is a voluntary, legally binding contract where an employee agrees to waive potential claims (e.g., unfair dismissal) in exchange for compensation. It may include terms beyond financial payment, like confidentiality and agreed references. Settlement agreements can be used in redundancy cases to provide enhanced pay and protect both parties from future legal claims.
Both can work together in redundancy situations, allowing employees to receive statutory redundancy pay along with additional benefits and compensation through a settlement agreement.
Yes, settlement agreements are typically confidential. They often include clauses preventing both the employee and employer from disclosing the agreement’s terms, financial details, and the circumstances of departure. Confidentiality helps protect both parties’ reputations.
However, standard exceptions allow disclosure to close family members, legal or financial advisors, tax authorities, and, in some cases, prospective employers. Breaching confidentiality can lead to serious consequences, including repayment of settlement sums or legal action.
For employees, it’s essential to understand and adhere to these terms and to seek legal advice if clarification or adjustments to the confidentiality clause are needed.
Generally, you do not need to attend meetings with your employer to finalize a settlement agreement. Most discussions can be handled through written communication, often with your solicitor negotiating directly on your behalf. However, in some cases, a meeting may be helpful, especially if the circumstances are complex or if the employer requests a face-to-face discussion.
If a meeting is requested, you can bring a representative, like a solicitor, for support. Alternatively, phone or video calls can be used instead of in-person meetings, and written communication is always an option. The goal is to reach a fair settlement in a way that feels comfortable for you.
Once a settlement agreement is signed, it is generally considered final and legally binding, making amendments rare. However, amendments may be possible in specific cases if both parties agree, such as to correct administrative errors, address outstanding payments, or adjust terms by mutual consent.
Amendments are typically formalised through an addendum to the agreement, signed by both parties. If amending the agreement isn’t feasible, alternative options may include seeking legal enforcement if the employer breaches terms or creating a separate agreement for additional terms. Consulting a solicitor can clarify your options if issues arise post-signing.
In cases of discrimination or harassment, settlement agreements are often used to resolve issues privately and provide fair compensation without going to a tribunal. These agreements typically include:
- Financial Compensation: This covers lost wages, emotional distress (using Vento Band guidelines), and injury to feelings.
- Non-Financial Terms: Confidentiality, positive references, non-disparagement, and sometimes commitments from the employer to improve policies or ensure no further contact with involved parties.
Settlement agreements in these cases must comply with legal requirements, including independent legal advice, to ensure fairness. Non-disclosure agreements (NDAs) are common but should not prevent reporting to regulatory bodies. If the terms are unsatisfactory, you can refuse to sign, leaving the option to pursue a tribunal claim. Legal advice helps in securing a fair settlement tailored to the impact of discrimination or harassment.
If you feel forced to resign due to your employer’s actions (constructive dismissal), a settlement agreement can provide a fair and private resolution. Constructive dismissal cases often involve issues like bullying, significant contract changes, or a toxic work environment. In these cases, a settlement agreement allows you to receive compensation without the stress and time of an employment tribunal.
Key components typically include:
- Financial Compensation: For lost earnings, notice pay, and sometimes emotional distress.
- Non-Financial Terms: Positive references, confidentiality, and non-disparagement clauses to protect your reputation.
- Waiver of Claims: Signing the agreement generally waives your right to bring further claims.
Consulting a solicitor is essential to ensure fair terms and a quicker resolution compared to tribunal proceedings. This option provides certainty and allows you to move on, though it usually requires waiving future claims.
A Settlement Agreement and a COT3 Agreement are both tools for resolving employment disputes, but they differ in process and flexibility:
- Settlement Agreement: A legally binding contract directly negotiated between the employee and employer, often involving solicitors. It offers flexibility, allowing for customized terms like compensation, confidentiality, references, and extended benefits. Legal advice is required to make the agreement binding.
- COT3 Agreement: Facilitated by ACAS, a COT3 agreement is used to settle claims that are in or may go to tribunal. It’s quicker and focuses mainly on financial compensation and waiving claims. Legal advice is not required but recommended, and customization is typically more limited.
Choose a settlement agreement for more tailored terms, while a COT3 can be an efficient, lower-cost solution for specific claims. Consulting a solicitor can help determine the best option based on your needs.
ACAS explains that settlement agreements are legally binding contracts allowing an employer and employee to resolve disputes or end employment on agreed terms. For a settlement agreement to be valid, it must be in writing, relate to a specific dispute, and the employee must receive independent legal advice on the terms.
Key points from ACAS include:
- Protected Conversations: ACAS advises that settlement discussions should be handled respectfully and confidentially, allowing open negotiation without statements being used in tribunal.
- Independent Legal Advice: Essential to ensure the employee understands the agreement’s impact, especially regarding waiving rights.
- Best Practices: ACAS encourages voluntary participation, reasonable time for review, and mutual respect to avoid undue pressure.
While ACAS provides guidance and can help facilitate settlements, they do not draft agreements or enforce terms. Following ACAS’s guidance helps both parties ensure a fair, legally compliant resolution.
In most cases, you don’t need to contact ACAS if offered a settlement agreement. Settlement agreements are typically handled directly between you and your employer, often with the help of a solicitor. However, ACAS can be helpful if:
- You’re Considering a Tribunal Claim: ACAS offers early conciliation, a free service to help settle disputes and avoid tribunal hearings, resulting in a legally binding COT3 agreement.
- Negotiations Are Challenging: ACAS can mediate if discussions stall or if a tribunal claim is likely.
For a straightforward settlement offer, working with a solicitor is generally enough to ensure you understand the terms and receive fair treatment. ACAS’s involvement is optional but can be beneficial in cases involving disputes or potential tribunal claims.
Yes, you can decline a settlement agreement, and doing so doesn’t automatically mean you’ll lose your job. Settlement agreements are voluntary, and employers cannot force you to sign. If you decline, your employer may take alternative steps depending on the situation:
- Redundancy: If the offer was due to redundancy, declining may mean the employer will follow a formal redundancy process.
- Performance Issues: If the offer relates to performance concerns, declining may lead to a performance improvement plan (PIP) or formal disciplinary actions.
- Workplace Conflict: In cases of conflict or grievance, declining may result in further discussions, mediation, or a formal grievance process.
It’s wise to seek independent legal advice to understand the risks and ensure your rights are protected if you decline. Your solicitor can help you assess your options, negotiate terms, or explore alternative resolutions like mediation or role changes.
Yes, signing a settlement agreement can impact your pension and benefits, though it varies by the specifics of the agreement. Here’s how:
- Pension: Your accrued pension benefits remain yours, but employer contributions stop once you leave. If leaving early impacts your retirement plans, consider negotiating extra compensation to cover potential pension shortfalls.
- Healthcare and Life Insurance: These benefits often end when your employment does, though you can negotiate to extend coverage temporarily or receive a lump sum for private insurance.
- Bonuses and Commissions: If eligible, ensure pro-rated bonuses or unpaid commissions are included in the settlement terms.
- Stock Options: Check if vested stock options or shares are preserved, or ask for compensation for any loss here.
Independent legal advice is essential to understand how a settlement affects these benefits and to negotiate fair compensation where possible.
If you feel pressured to sign a settlement agreement quickly, you have several options to ensure you make an informed decision:
- Take Your Time: Employers must give you reasonable time to review, typically around 10 days. Politely request additional time if needed.
- Seek Independent Legal Advice: Legal advice is required for the agreement to be binding. A solicitor can review the terms, negotiate better conditions, and ensure you understand your rights and what you’re waiving.
- Consider Alternatives: If the settlement feels unfair, consider options like staying in your role, raising a grievance, or exploring a tribunal claim with your solicitor’s guidance.
- Stay Calm and Professional: If your employer is pressuring you, remember that a settlement agreement is voluntary. You’re under no obligation to sign if the terms don’t meet your needs.
Taking these steps helps you avoid hasty decisions and ensures the agreement aligns with your best interests.
There is no strict legal requirement for a ten-day response period, but ACAS recommends giving employees at least ten days to review a settlement agreement. This allows time to consult with a solicitor, understand the terms, and make an informed decision.
If you’re given less than ten days and feel rushed, you can:
- Request an Extension: Politely ask for more time to seek legal advice and review the agreement fully.
- Seek Prompt Legal Advice: A solicitor can help you quickly assess the terms, negotiate if needed, and ensure you understand any rights you may be waiving.
Taking adequate time helps avoid waiving valuable rights or accepting unfavorable terms. The decision should be voluntary and made with full understanding.
Yes, it’s common for employers to cover a portion of your solicitor’s fees when offering a settlement agreement. This contribution, usually between £350 and £750 plus VAT, is meant to cover the cost of basic legal advice required to make the agreement binding.
The employer’s contribution typically covers:
- Initial Review of the agreement
- Explanation of Terms and waived claims
- Financial Review to ensure fair compensation
If additional services like negotiating terms or tax advice are needed, your solicitor may charge extra. In some cases, you can request a higher contribution from your employer if the agreement is complex. Generally, you won’t need to pay upfront, as the solicitor invoices the employer directly for the covered amount.
Your length of service significantly influences the settlement amount in several ways:
- Redundancy Pay: Statutory redundancy pay increases with length of service, with longer-serving employees often receiving higher payouts. Some employers offer enhanced redundancy packages based on years worked.
- Unfair Dismissal Claims: For longer-serving employees, the potential for a strong unfair dismissal claim can lead to higher settlement offers to avoid tribunal risks.
- Career Transition: Employees with long service may have a harder time finding similar roles, giving grounds to negotiate higher compensation for the transition period.
- Pension and Benefits: If close to retirement, you might negotiate for pension top-ups or extended benefits to offset losses from early departure.
- Leverage in Negotiations: Long tenure often strengthens your position in negotiating both financial and non-financial benefits, such as health coverage extensions or agreed references.
Seeking legal advice ensures that your length of service is adequately reflected in the settlement terms, helping secure a fair outcome.
Generally, a settlement agreement is final, and by signing, you agree not to pursue further claims against your employer. However, there are specific cases where additional legal advice may be necessary:
- Employer Breach: If your employer fails to fulfill the terms (e.g., delayed payment or missing agreed reference), you can seek legal advice to enforce the agreement.
- Newly Discovered Issues: In rare cases, new claims, like a previously unknown health issue related to your work, may still be actionable.
- Tax Issues: If unexpected tax questions arise, further legal or tax advice can help resolve these.
- Restrictive Covenants: If your agreement includes restrictions on future employment, a solicitor can clarify your obligations.
It’s challenging to change a signed agreement, so address all questions with a solicitor before signing to ensure a clear understanding of the terms and long-term impact.
Yes, signing a settlement agreement can carry risks, as it’s a legally binding document where you typically waive your right to bring future claims. Key risks include:
- Waiving Future Claims: By signing, you generally give up the right to pursue claims like unfair dismissal or discrimination, so it’s essential to assess the value of these claims before agreeing.
- Potentially Inadequate Compensation: Initial offers may be lower than what you’re entitled to. Review compensation carefully to ensure it covers lost earnings, bonuses, and transition needs.
- Restrictive Covenants: Some agreements include non-compete clauses or confidentiality terms that may impact future job opportunities. Check these clauses with a solicitor.
- Tax and Benefit Implications: Some payments may be taxable, and benefits like pensions or health insurance may end with your employment. Clarify tax treatment and benefit impacts.
- Finality of Agreement: Once signed, it’s hard to challenge a settlement agreement, so ensure all terms are clear and satisfactory.
Seeking independent legal advice helps you understand these risks and ensures you’re fully protected before signing.
Yes, you can include a reference clause in your settlement agreement to ensure future employers receive a consistent and positive account of your role. Including this clause can help protect your professional reputation and make sure only agreed-upon information is shared.
Here’s how it works:
- Types of References: Options include a basic reference (job title and dates) or a more detailed reference highlighting achievements, if agreed upon.
- Negotiation Tips: Work with your solicitor to draft the content, limit future feedback to the agreed terms, and clarify who within the company will provide the reference.
- Enforcement: A reference clause is legally binding; any breach by the employer may lead to legal action for damages.
Adding a reference clause helps you control the narrative and supports a smoother transition to future roles.
A settlement agreement can impact your LTIP, often depending on the plan’s terms and your departure circumstances. Key points include:
- Forfeiture of Unvested LTIPs: In many cases, unvested LTIPs are forfeited upon leaving the company unless otherwise negotiated.
- Pro-Rata or Accelerated Vesting: You may be able to negotiate partial or accelerated vesting, especially if your departure is due to redundancy or if you’re near a vesting milestone.
- Tax Implications: LTIPs often carry specific tax obligations, so ensure your settlement agreement addresses any tax considerations, including income or capital gains tax.
- Role of a Solicitor: A solicitor can review your LTIP terms, negotiate vesting options, and clarify tax implications to protect your entitlements.
Discussing your LTIP in detail with a solicitor before finalising the settlement helps secure the most favourable terms.
An enhanced termination payment is an additional sum offered by employers as part of a settlement, often exceeding standard severance or redundancy pay. It may include extra redundancy pay, payment in lieu of notice, bonuses, and compensation for job loss. This payment helps smooth the exit and reflects the employee’s service and contributions.
To negotiate an enhanced payment:
- Evaluate Entitlements: Know your contractual rights and any potential claims.
- Highlight Contributions: Emphasize your achievements to support your request.
- Consider Non-Financial Benefits: Request benefits like a reference or health coverage.
- Maximize Tax Efficiency: Work with a solicitor to structure payments to minimize tax.
A solicitor can guide you through negotiations, assess potential claims, and ensure you secure the most favourable terms.
A settlement agreement can impact your eligibility for means-tested benefits, such as Universal Credit, Jobseeker’s Allowance, Housing Benefit, and Council Tax Reduction. Here’s how:
- Income and Savings: Payments like notice pay or holiday pay are treated as income and may reduce benefits in the month they are received. Savings above £6,000 can reduce, and above £16,000 can disqualify you from certain benefits like Universal Credit.
- Structuring the Payment: You might reduce the impact on benefits by structuring the payment in installments or specifying portions for redundancy and compensation, which can be less impactful.
- Seek Professional Advice: Consulting a solicitor or benefits advisor can help you understand how to structure your settlement to minimize effects on benefits eligibility.
Planning ahead ensures you retain as much of your benefits and settlement as possible.
If you’re unsure about terms in your settlement agreement, it’s essential to fully understand each part before signing, as this is a legally binding document that impacts your rights. Key steps include:
- Seek Independent Legal Advice: A solicitor can explain terms, identify issues, and negotiate adjustments if needed. Many agreements cover the cost of legal advice.
- Ask Questions: Clarify what rights you’re waiving, any tax implications, and how restrictive clauses may affect future employment.
- Request Amendments: If terms seem unfair or vague, your solicitor can help modify clauses such as restrictive covenants or confidentiality to suit your needs better.
Fully understanding the agreement ensures you’re making a well-informed decision about your rights and financial security.
A solicitor provides invaluable support during a settlement agreement by:
- Clarifying Terms: Explaining complex legal language, ensuring you understand the rights you’re waiving and the financial impact.
- Negotiating Better Terms: Working to improve financial compensation, benefits, and restrictiveness of clauses like non-compete agreements.
- Ensuring Tax Efficiency: Structuring the payment to maximize tax-free allowances, helping you retain more of your settlement.
- Protecting Future Employment: Negotiating for positive reference clauses and reasonable confidentiality terms.
- Providing Legal Recourse: Ensuring protections if your employer breaches the agreement, with options to pursue legal action if necessary.
Having a solicitor brings peace of mind, at no personal cost, when you use our solicitors as we work within the fees covered by your employer.
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Maximise Your Settlement
Not satisfied with the terms you’re being offered? I can help negotiate a better deal, leveraging my deep expertise in settlement agreements to secure compensation that meets—or exceeds—your expectations.
My Settlement Agreement Service is 100% Tailored to Your Needs
Your settlement agreement journey is unique, and my service is built to fit around you. Whether you’re looking for a quick legal check and sign-off on what your employer has offered or want to negotiate and maximise your settlement, I am here to support you.
Perhaps you’re seeking a balance: a fast resolution with some negotiation to ensure you get the best possible deal. Whatever your priorities, I will tailor my service to meet your specific needs, and best of all, it’s completely free to you.
Here are a couple of examples of how I can assist, but rest assured, my approach is flexible and fully adaptable to match your individual situation. If you’re unsure about what you need, don’t worry. With experience handling hundreds of settlement agreements and negotiations, I am here to provide clear guidance and make the process as smooth and stress-free as possible.
Let me help you get the outcome you deserve.
If you have been offered a settlement agreement and are happy with the terms, I provide a fast process to sign-off with a full legal review. Benefits include:
- Fast and efficient, can be completed in less than 24 hours
- I check your settlement agreement and explain it to you
- Great for when you want to move on quickly
If maximising what you get out of your employer is your priority, for no cost I offer a comprehensive negotiation service. Benefits include:
- I will negotiate as long as it takes to get the deal you want
- I am an expert negotiator with decades of experience
- I will get the very best settlement possible
Testimonials
I have received many unsolicited testimonials over the years. Here are some recent messages from satisfied clients.
RM
You have always been a huge help throughout the time I have worked with you and I really appreciate all of your assistance.
NR
Thank you for your fast response. I tried some other firms before I found you, and they didn’t seem interested. You have been excellent.
MJ
Thank you for all of your help, you have been amazing.
GC
Thank you for all your help and support. I would not have managed without it.
A settlement agreement is a legally binding contract between an employer and an employee that sets out agreed terms for ending the employment relationship. It is often used to resolve disputes or to agree on specific terms of departure, usually involving a financial payment to the employee.
In a settlement agreement, the employee typically agrees not to pursue any future claims against the employer in exchange for the compensation and any additional agreed terms. These agreements often cover aspects such as final pay, Payment in Lieu of Notice (PILON), benefits, an agreed reference, and confidentiality or non-disparagement clauses.
UK law requires that the employee receive independent legal advice on the agreement’s terms, ensuring they understand their rights and that the agreement is fair. This is where a solicitor like myself comes in—to guide you through the process, protect your interests, and make sure you’re fully informed before signing.
Legal advice is essential for a settlement agreement because UK law requires that employees receive independent legal counsel before signing. This requirement is in place to protect your rights and ensure you fully understand the terms and implications of the agreement.
A settlement agreement often involves waiving your right to make future claims against your employer, so it’s crucial to have a solicitor review the terms to confirm they are fair and complete. Legal advice helps ensure you’re receiving appropriate compensation, including any final pay, benefits, and Payment in Lieu of Notice (PILON). It also helps clarify any restrictions on future employment and advises on tax implications of the payments.
As a highly experienced solicitor specialising in settlement agreements, I can negotiate on your behalf to improve terms, if necessary, and make sure that everything is clear and beneficial to you. Without legal advice, the agreement would not be enforceable, and you may miss important protections and opportunities to enhance the agreement.
A settlement agreement usually includes several key elements that outline the terms of your departure from the company. Here’s what you can typically expect:
- Compensation Payment: The agreement will specify a financial payment, often including a lump sum to cover potential claims, as well as final salary, holiday pay, and any bonus or commission owed.
- Payment in Lieu of Notice (PILON): If you’re not required to work your notice period, the agreement may include PILON, compensating you for that time based on your contractual salary.
- Waiver of Claims: By signing, you generally agree to waive any future claims against your employer related to your employment or its termination. This includes claims for unfair dismissal, discrimination, or breach of contract.
- Confidentiality Clause: Settlement agreements often include confidentiality provisions, requiring you to keep the terms of the agreement and sometimes the circumstances of your departure private.
- Non-Disparagement Clause: This clause typically prevents both parties from making negative statements about each other. It’s intended to protect reputations and encourage a professional departure.
- Reference: Many agreements include an agreed-upon reference that your employer will provide to future employers, which can help support your next career steps.
- Restrictive Covenants: If your original contract had restrictions on working with competitors or contacting clients after you leave, these may be reaffirmed or modified within the settlement agreement.
- Tax Implications: The agreement will outline how the payments are taxed, with the first £30,000 of a compensation payment often tax-free, depending on the circumstances.
Each agreement is unique, and terms can vary widely based on your role, the circumstances of your departure, and negotiations. As your solicitor, I will review the agreement to ensure it covers all necessary areas fairly and that it provides the protections and benefits you’re entitled to.
The amount you can expect to receive in a settlement agreement depends on several factors, including the terms of your contract, your length of service, the circumstances of your departure, and any potential claims you could bring against your employer. Here’s a general overview of what might influence the final amount:
- Base Compensation: Many agreements include a lump sum payment intended to compensate you for any claims you waive, with amounts varying widely based on the situation. This is often negotiated based on what a tribunal might award if your case went to court.
- Notice Period Pay: If you’re not required to work your notice period, the agreement may include Payment in Lieu of Notice (PILON), which compensates you for the full notice period at your usual salary.
- Statutory or Enhanced Redundancy Pay: If you’re being made redundant, you may be entitled to statutory redundancy pay, or sometimes a higher (enhanced) redundancy package, depending on your contract or company policy.
- Additional Benefits: In some cases, the agreement might include payment for unused annual leave, bonus or commission owed, pension contributions, and even additional benefits like health insurance for a specified period.
- Tax-Free Allowance: In the UK, the first £30,000 of a compensation payment is usually tax-free, provided it meets certain conditions. This can make a significant difference in the net amount you receive.
- Negotiable Elements: You may be able to negotiate a higher settlement if there are grounds for a potential legal claim, such as unfair dismissal, discrimination, or breach of contract. Your solicitor can help assess these factors and advocate for the best possible terms.
While there’s no single answer to how much you’ll receive, as your solicitor, I will review your situation and help you understand what you’re entitled to, negotiate if needed, and ensure you receive fair compensation tailored to your specific circumstances.
The tax implications of a settlement agreement can be complex, and understanding how your payments are taxed is essential to maximising your take-home amount. Here’s a breakdown of how different components of a settlement agreement are typically treated under UK tax law:
- Compensation Payments: In many cases, the first £30,000 of a compensation payment can be received tax-free. This exemption generally applies to payments for loss of employment, provided they are not contractual payments for work or services. Any amount above £30,000 is subject to income tax.
- Payment in Lieu of Notice (PILON): If your settlement includes a payment in lieu of notice, it is usually subject to tax and National Insurance contributions. This is because PILON is treated as a contractual payment for your notice period rather than compensation for job loss.
- Holiday Pay, Bonuses, and Other Entitlements: Any payments that cover outstanding holiday pay, bonuses, commission, or other contractual entitlements are generally taxable. These are treated as regular income and taxed accordingly.
- Employer Contributions to Benefits: Sometimes, settlement agreements include contributions to pensions, health insurance, or other benefits. Tax treatment for these varies, so it’s advisable to check with a solicitor or tax advisor.
- Ex-Gratia Payments: Payments described as “ex-gratia” or goodwill payments may be eligible for the £30,000 tax-free exemption if they relate to compensation for the end of your employment, rather than any contractual obligation.
- Legal Fees: If your employer contributes to your legal fees for the settlement agreement, this amount can be paid directly to your solicitor and is usually tax-free as long as it specifically covers the cost of legal advice on the agreement.
Navigating the tax implications of a settlement agreement can be complicated, so seeking advice from an experienced solicitor like me can help you understand how much of your settlement will be subject to tax and ensure you receive your full entitlements in the most tax-efficient way possible.
The time it takes to complete a settlement agreement can vary depending on several factors, but in many cases, it can be completed within a few days to a couple of weeks. 24 hours is possible if both sides are happy with the deal and keen to get it signed off promptly. Here’s an overview of what influences the timeline:
- Review and Negotiation: If the terms of the settlement agreement are straightforward and acceptable, the process can be completed relatively quickly—sometimes in as little as 24–48 hours. However, if negotiations are needed to improve terms such as compensation, references, or restrictive covenants, this can add a few days or longer, depending on the complexity.
- Employer’s Response Time: The employer’s response time also affects the timeline. Some employers process agreements promptly, while others may require additional time for internal reviews, especially if multiple departments (such as HR and legal) need to sign off.
- Legal Advice: UK law requires that you receive independent legal advice on a settlement agreement for it to be legally binding. The solicitor’s review and advice appointment are typically straightforward and can be scheduled quickly, particularly if there are no complex terms.
- Finalising and Signing: Once terms are agreed upon, finalising and signing the document is usually quick. Both parties must sign, and your solicitor will confirm that you’ve received the required advice, making the agreement enforceable.
A standard settlement agreement can often be completed in a few days if all parties are responsive, though more complex agreements may take a week or two. Working with a solicitor who is experienced with settlement agreements can help expedite the process and ensure everything is handled efficiently, which is one of the reasons you should use me as your solicitor.
Yes, you can absolutely negotiate the terms of your settlement agreement, and doing so can often result in better financial compensation and more favorable terms. Employers may present an initial offer, but it’s common and perfectly acceptable to negotiate, especially if the circumstances of your departure suggest you could be entitled to more.
Here are some key areas where negotiation may be beneficial:
- Compensation Amount: The financial offer in a settlement agreement is often the primary focus of negotiation. If you feel the amount doesn’t adequately compensate you for leaving, especially if you have potential claims for unfair dismissal, discrimination, or breach of contract, you may be able to negotiate a higher settlement.
- Payment in Lieu of Notice (PILON): If the agreement includes PILON, you can discuss the terms to ensure it fully compensates you for your notice period, including any other benefits you would have received.
- Restrictive Covenants: Settlement agreements sometimes contain restrictive covenants that limit your ability to work for competitors or contact former clients. If these restrictions are too broad or could impact your future career, you can request modifications to make them more reasonable.
- Agreed Reference: It’s common to negotiate the wording of a reference letter included in the settlement agreement, ensuring it reflects your work positively and helps support your future employment prospects.
- Non-Disparagement Clauses: These clauses prevent both you and your employer from making negative statements about each other. Negotiating mutual non-disparagement terms can protect your reputation.
- Tax Efficiency: In some cases, there may be ways to structure payments to maximize tax efficiency, though it’s essential to ensure compliance with tax regulations.
As a solicitor highly experienced in settlement agreements, I can assist you with negotiations or negotiate for you, advocating on your behalf to secure the best possible outcome. I can assess the fairness of the agreement, provide insight on what might be achievable, and help you navigate the process professionally. Remember, employers expect some level of negotiation, and it’s your right to pursue terms that fairly reflect your situation.
Payment in Lieu of Notice (PILON) is a payment made by an employer to an employee when the employer decides to end the employment relationship immediately rather than having the employee work through their notice period. Instead of working the remaining notice period, the employee receives a lump sum that compensates them for the notice period they would have worked.
Here’s how PILON works:
- Immediate Termination: When an employer issues PILON, the employee’s contract ends immediately. The employee is not required to work their notice period but is still compensated as if they had done so.
- Payment Calculation: PILON is generally calculated based on the employee’s usual salary, covering the pay they would have received during their notice period. This can include basic salary and, in some cases, other benefits like pension contributions or car allowances, depending on the terms of the employment contract.
- Tax Implications: Unlike some parts of a settlement agreement, PILON is usually subject to income tax and National Insurance contributions, as it is treated as a contractual payment. This is different from compensation payments, which may be tax-free up to £30,000 in certain cases.
- Contractual or Discretionary: In some employment contracts, PILON is a contractual right, meaning the employee is entitled to it if the employer opts to terminate immediately. If it’s not mentioned in the contract, the employer may still offer it, but it is discretionary. Employers sometimes prefer PILON to ensure a clean break and prevent potential disruptions from having the employee work out their notice.
PILON allows both parties to part ways quickly while still honouring the employee’s financial entitlement to the notice period. As your solicitor I will clarify if PILON applies to your settlement agreement and ensure it is calculated fairly according to your contract.
The timing of your settlement agreement payout depends on a few factors, but payments are typically made within 7 to 28 days after signing the agreement. Here’s what can affect the timing:
- Agreement Finalisation: Both you and your employer need to sign the settlement agreement, and your solicitor will confirm you’ve received the required independent legal advice. Once these steps are complete, the agreement becomes legally binding, and the employer can then process the payment.
- Payment Terms in the Agreement: Most settlement agreements specify a timeline for payment, often within a set number of days (e.g., 14 or 28 days) after the agreement is signed or after your last working day, if you’re required to work a notice period. Reviewing this clause can give you a clear idea of when to expect the payout.
- Notice Period: If your settlement agreement includes a Payment in Lieu of Notice (PILON), this amount may be paid on your final working day or shortly after, depending on the terms agreed.
- Employer Processing Time: Some employers may process payments more quickly, while others might take longer depending on internal policies. If timing is critical, you can ask for a specific payment date to be included in the agreement.
- Holiday or End-of-Month Payment Schedules: Payments may be influenced by payroll cycles or delays if your agreement is signed around public holidays. Many companies align settlement payments with their end-of-month payroll, which can affect timing.
If you’re concerned about receiving your payment promptly, as your solicitor, I will ensure the agreement specifies a clear payment date, minimising any risk of delays. Generally, settlement payouts are straightforward, and most employers aim to process them within the agreed timeframe.
Yes, my services are truly 100% free of charge to you, the employee. I work within the fees that your employer provides as part of your settlement agreement, so there is no cost to you personally. Unlike some other firms that charge additional fees for negotiation or take a percentage (often up to 35%) of any increase in your settlement, I do not apply any hidden fees or extra charges.
Whether it’s a straightforward sign-off or requires extended negotiation to improve terms, my fee is fully covered by your employer, as specified in the agreement. This means you can rest assured knowing that you’ll receive comprehensive, dedicated support without any unexpected costs. I am committed to helping you achieve the best possible outcome with complete transparency and no hidden costs.
There is no need for us to meet in person for me to handle your settlement agreement. All communication can be by telephone and email. I am also happy to schedule a video call if you would like to talk face-to-face online. Likewise, all of my communications with your employer when negotiating and finalising your settlement agreement will be by phone and email.
If you have received a settlement agreement, you will have a lot on your plate whether you are getting straight into your next career move or taking time out for reflection. Whatever you need to do, a trip to a solicitor’s office is unlikely to be how you want to spend your time. I fully understand this. Furthermore, not requiring in-person meetings enables me to keep my costs down, which is why I can commit to never charging you a penny for my services, unlike other solicitors who may have high overheads to cover.
Yes, signing a settlement agreement will typically affect your ability to make future claims against your employer. One of the main purposes of a settlement agreement is to provide a clean break, where both you and your employer agree on the terms of your departure, including any compensation, in exchange for waiving your right to bring further claims.
When you sign a settlement agreement, you are generally agreeing not to pursue any legal claims related to your employment or its termination. This can include claims for unfair dismissal, discrimination, breach of contract, and other employment-related issues. The agreement will usually specify which claims are waived, so it’s important to review this carefully to ensure you understand which rights you are giving up.
However, certain rights cannot be waived, such as those related to accrued pension entitlements or personal injury claims that you were not aware of at the time of signing. As your solicitor, I will clarify what rights you are retaining and ensure that the agreement fairly compensates you for any claims you are waiving.
Signing a settlement agreement is a significant step, so having legal advice from a specialist solicitor like me ensures you fully understand the implications and feel confident in your decision to move forward.
If you choose not to sign the settlement agreement, several outcomes are possible, depending on your circumstances and your employer’s position. Here’s what could happen:
- Employment Terms Continue as Normal: Without a signed settlement agreement, your employment contract remains in effect, and you would continue to work under the existing terms and conditions. If the settlement agreement was offered in connection with a redundancy or termination, your employer may proceed with these actions under the standard process, which may not include the same financial terms offered in the settlement.
- Risk of Losing Offered Compensation: A settlement agreement often provides a financial payment or enhanced benefits that go beyond what you’d be entitled to through a standard exit or redundancy. If you decline to sign, you may lose these additional benefits, including any compensation or favorable terms included in the settlement agreement.
- Right to Pursue Claims: By not signing, you retain the right to pursue any employment-related claims against your employer, such as unfair dismissal or discrimination, if applicable. While this could allow you to seek recourse through an employment tribunal, it also means that the outcome is less certain, and it may take time to reach a resolution.
- Negotiation Opportunity: Sometimes, employees choose not to sign initially because they wish to negotiate better terms. Declining to sign may lead to further discussions, where you can seek advice from a solicitor to help improve the agreement terms and ensure a fair outcome.
In summary, while you’re not obligated to sign a settlement agreement, doing so often provides a clear, mutually beneficial exit with financial security. As your solicitor, I will help you evaluate your options, ensuring that whatever path you choose aligns with your goals and protects your rights.