Employers Settlement Agreements

We can meet you immediately & honour costs offered by your employer. Professional, proactive and experienced in negotiating settlement agreement terms.

What is a Settlement Agreement formally known as a Compromise Agreement?

A ‘Settlement agreement’ is a legally binding agreement which is considered a mutual contract between the employer and employee. It is provided in lieu of termination of employment either by reason of redundancy, by agreement or in settlement.

It usually provides for a severance payment by the employer ‘compensation sum’, in return for which the employee agrees not to pursue any claim they may have at an employment tribunal. The Settlement agreement will also deal with the notice element in the contract of employment and may provide for a “payment in lieu” which may be taxable if a clause exists in your contract and often an agreed reference will be attached.

Why would a Settlement Agreement be necessary?

An employer can only protect itself from an employee bringing a complaint to a tribunal after redundancy by having them sign away their right to do so in a settlement agreement. This can only really be done in a settlement agreement and has the effect of turning the redundancy package into a “full and final” settlement of any claims the employee has against the employer. Likewise if there has been any internal grievances or disciplinary an agreement can ensure a swift resolution without any come back for either the employer or the employee.

Why should you seek legal advice?

Unfortunately Settlement agreements are not as simple as they sound. It is actually a legal requirement that you seek independent legal advice so you understand the terms and conditions. The Settlement agreement will not otherwise be binding. Furthermore, negotiation is required to reach an agreement which satisfies both parties and a solicitor can explain to you whether the terms offer you adequate protection and make sure you are being paid a suitable amount of compensation. Since the Settlement agreement will bar you from making any claims to the Employment Tribunal it is essential you know what you are agreeing to, i.e. you may have restrictions in your contract which remain in force and which may prevent you obtaining income from a nearby competitor.

How much does it cost?

The employer should pay for the employee’s legal advice and its contribution will be set out in the Settlement agreement itself. This firm will often fix the advice to the sum agreed by the employer or will negotiate these fees on your behalf.

If you are advised your claim is worth more than that being offered we can even offer you a no win no fee on any sums above , what you have already been offered, we achieve upon settlement. More money without the risk of costs to you (subject to terms)

What if I don’t agree to the terms?

If you do not sign the Settlement agreement the employer will not pay you the compensation sum. Instead you will need to raise a grievance or issue a claim. The solicitor should explore these options with you during the meeting.

If however, you simply wish to amend the clauses of the Settlement agreement or negotiate a larger compensation sum this will invariably be handled by the solicitor within days of you instructing them to represent you. It maybe that this involves further work and you will be liable for these costs, but if you seek to recover further sums or reduce your termination restrictions or obtain a favorable reference then this may well be additional costs.

How long will it take to conclude matters?

We can see an employee as soon as the draft Settlement agreement has been provided to them. We will spend around 30-45 minutes with you taking you through the Settlement agreement and addressing any questions you have. If there are amendments required these will be sent to the employer within 24hours of the meeting. Often Settlement agreements are signed and concluded the same day, but it will depend on the circumstances and the complexity of the terms to be re-negotiated

When will the compensation be paid?

Usually the sums are paid within 7 to 14 days of signing the Settlement agreement or some will say in the next payroll or 30 days. However, this can vary depending on your termination date or what has been agreed, but payment terms will be contained in the Settlement agreement. The level of sums and which are subject to tax deductions will be outlined in the Settlement agreement.

Is my notice pay taxable?

If you are working your notice you will be paid as normal and subject to the usual tax deductions.

If you are being paid in lieu of notice, in that you receive your notice pay, but leave early then this will depend on your employment contract. The tax situation will be discussed with you solicitor and set out in the Settlement Agreement itself.

If there is a clause in the Settlement agreement permitting your employer to pay you in lieu of notice, known as a PILON clause, then all notice pay will be subject to tax. If there is no PILON clause the employer cannot force you to accept payment in lieu, but if you do accept it in some circumstances this can be paid tax free as part of the compensation sum. This is subject to a number of factors which we will discuss with you. We advise on Settlement agreement tax in terms of what is paid tax free and what is not.

Can I make the Agreement more tax efficient?

We are not tax advisors so cannot advise you on this, but speak to a pension manager or account. Often putting any sums over the £30,000 tax free bracket into your pension saves you tax and helps you benefit more in the future. Any stocks or shares held with your employer may require advise also so bear this in mind.

NEED US?

  • Book an appointment and agree a fixed fee for reviewing the Settlement agreement and minor amendments
  • Send us your draft Settlement agreement and employment contract to review
  • Confirm your date of birth, salary & whether you accept a Settlement agreement in principle
  • We then handle the rest for you

We frequently meet people looking for settlement agreement advice in the City of London EC2A , but we can handle calls/meetings throughout London and beyond.

For more information contact us…

0207 426 0382

enquiries@acitylawfirm.com