How To Negotiate A Settlement Agreement – Negotiating a settlement agreement is one of those things that you never have to think about… until you’re in the situation.
And because settlement agreements are usually part of a process that’s been particularly stressful for all involved, it can feel like the weight of the world is on your shoulders.
But have no fear because that’s precisely why we’re here to help you understand how to negotiate a settlement agreement.
What Is A Settlement Agreement And Why Might I Need One?
In its simplest terms, a settlement agreement involves an employee waiving their right to legal action after leaving their employment in exchange for a settlement payment.
It’s regularly used in redundancy arrangements and every settlement agreement is likely to look different, given the individual circumstances, differences in salary, where there is evidence of unfair dismissal, and other extenuating circumstances.
You might have been offered a settlement agreement and you’re not sure what to do next – which is perfectly understandable.
It’s also worth knowing that employees CAN request a settlement agreement.
The suggestion usually comes from the employer, but there’s nothing to say that employees can’t ask their employer to begin a protected discussion about a potential settlement agreement.
This could be particularly useful if you’re aware of a restructuring of the business or if a department is shutting down and redundancies are possible in the future.
If you find yourself in a position where redundancy is a possibility, you should be aware that your employer MUST follow a fair redundancy procedure in order to avoid unfair dismissal or legal action in the future.
This means applying fair selection criteria, consulting with employees, explaining the reasons for redundancy, exploring alternative options, and allowing employees the opportunity to appeal the decision.
But How Do I Negotiate A Settlement Agreement?
The best thing to do in this situation is to seek expert legal advice from an employment solicitor to ensure that you get the best possible support from the very beginning.
Employment law can be tricky to navigate and having a solicitor fighting your corner will ensure you get the best outcome for you.
A settlement agreement must include everything relevant to the situation, which certain things such as:
- A termination payment – this is financial compensation for the end of the employee’s time in your employment
- Any remaining salary, notice pay, holiday pay, bonuses, commission, and any other figures as a payment
- A written agreement for the employee to waive their right to bring legal action at a later date via employment tribunal or otherwise
- A signature by a solicitor, union official, or Citizens Advice Bureau advocate
- A non-disclosure clause
- A ‘non-derogatory clause’ where both the employee and employer agree not to say anything negative about each other
It might be that there are additional clauses, payments, terms, and agreements included, but this is all a part of the negotiation process.
The most important thing to remember when you’re negotiating a settlement agreement is that you’re probably not going to get everything you want…
That’s the nature of any deal, negotiation, and agreement.
Because the employer has certain goals in their mind that they want to achieve and any employee is going to want certainty on their situation moving forward, have a figure in mind in terms of a financial settlement, and you might be hopeful of achieving certain other benefits too.
So, be prepared to meet in the middle!
The good news is that employment solicitors do this all the time, and they know that the best resolution in a settlement agreement is one that’s quick, fair, and delivers certainty.
When you’re negotiating, you’ll also need to be aware of the tax rules on compensation and termination payments.
The first £30,000 of any termination payment (not including notice pay or pay in lieu of notice) is tax-free, but anything over and above that figure will be subject to tax rules.
The rules cover statutory redundancy pay, additional severance or enhanced redundancy pay, and non-financial benefits such as company cars, tech, and any other property you keep.
Employers will also pay employer Class 1A National Insurance on any cumulative amount over £30,000.
Settlement Agreement Solicitors Near Me
Settlement agreements are a tricky business, and negotiating them can be difficult, especially if you’re unsure of what your rights are, what a good offer constitutes, and what you’re entitled to.
But the good news is that if you need any help with negotiating a settlement agreement, or just the process in general, we’re here to help.
At Solicitors Near Me, we have expert employment solicitors we can connect you with for FREE.
Find An Employment Solicitor Now