Our Settlement Agreement Solicitors provide specialist help & advice for employees of all levels of experience.
- Fixed-Fee, Same Day Settlement Agreement Completion
- Excellent, experienced negotiator: getting the best deal for you
- 25 years’ experience, 100% success rate this year
To begin the process, all we need is the agreement, your manager’s contact details and a contact number for you.
Call us now on 020 7247 7190 or complete our online contact form.
New Article > Settlement Agreements - What's it worth?
What is a settlement agreement?
Settlement Agreements are simply a contract designed to bring employment to an end without any problems. Once signed you cannot take any claims to an Employment Tribunal.
If you have been offered a Settlement Agreement by your employer, you will need to take advice from an experienced Employment Law Solicitor. Your employer will normally agree to pay a contribution (anywhere between £250 and £500 plus VAT) for our advice and so we fix our fee to that amount. We never charge employees for this kind of advice.
As part of the fixed fee we will look at claims you might have and also the kind of compensation you might be able to win. Before speaking to us, it would be helpful for you to think about:
- What kind of claims do you have? Unfair dismissal, discrimination and whistleblowing (reporting legal issues followed by detrimental treatment or dismissal)
- What are the key facts? To have a good case you will need to start with:
- What happened?
- When it happened?
- Are there any documents or witness? Can you prove what happened?
The events need to be recent. Most tribunal claims require starting the ACAS process within 3 months.
Same-Day Settlement Agreement Solicitors anywhere in England
We will deal with your agreement the day you contact us.
With over 30 years’ experience, we can assess your legal rights quickly and efficiently. In many cases, employees are happy to sign the agreement straight away, and we can do that on the day we receive the document. If there are potential legal issues, we can advise you on how this might affect the amount offered.
View our Settlement Agreement Frequently Asked Questions below.
- Why sign a Settlement Agreement?
- What is included in a Settlement Agreement?
- Do I have to accept the Settlement Agreement?
- What are my options after being offered a Settlement Agreement?
- What happens during the negotiation process?
- What are the standard terms of a Settlement Agreement?
- What is a ‘protected conversation’?
- What is a pre-termination negotiation?
- Are payments for Settlement Agreements tax-free?
- Is the amount I’ve been offered fair?
- What are the different types of Settlement Agreement Payments?
- Can my employer recover money that was paid to me if I break the Settlement Agreement?
- What happens if a Settlement Agreement is broken?
- What happens if an agreement cannot be reached?
1. Why sign a Settlement Agreement?
In most cases, a Settlement Agreement is much better than taking a claim forward through a lawyer. Here are some of the advantages:
- No legal fees (if you use a lawyer to go to a tribunal you won’t get your fees paid and these will reduce the amount)
- Tax efficiency- compensation or ex gratia (gift) payments can be made tax free up to £30,000
- Settlements protect your reputation by fixing the reference and preventing negative comments. Employment Tribunal decisions are available publicly online
- It is generally much easier to get a job when you are not in a dispute with your previous employer
- A Settlement Agreement offers peace of mind. If you go to a tribunal, there is a risk you might lose; this can sometimes be on a point of evidence which comes out on the day, or a difficult point of law. Giving evidence against former colleagues is a very stressful experience for most people…sometimes it can take over a year to get to a tribunal hearing.
When considering whether you should sign a Settlement Agreement, there are both general and specific matters to consider. Each of these is set out below.
Will it bring a difficult employment matter to an end?
This is one of the primary motives for putting a Settlement Agreement on the table. It allows both parties to get what they want without involving an employment tribunal. It allows your employer to bring the employment relationship to an end without fear of tribunal action and ensures you will be fairly compensated.
Is there a better alternative?
A Settlement Agreement might not be the best option for your circumstances. You may wish to stay in employment, or the matter or dispute may be significantly serious to warrant employment tribunal action. As part of the fixed fee agreement, we will look at claims you might have and the kind of compensation you might be able to win.
Is what is being offered fair?
Your lawyer will be able to discuss with you the potential outcome, should you take your case to an employment tribunal. This should form the basis of what is offered in your Settlement Agreement. However, there are many things to consider when determining whether a Settlement Agreement is a fair offer and not just a financial award. As your Settlement Agreement Solicitors, we may be able to negotiate a better and fairer deal for you.
2. What is included in a Settlement Agreement?
Settlement Agreements tend to be quite standard, but they can vary from one workplace to another, including the circumstances leading to the offer. A standard Settlement Agreement would include:
- Payment of notice/garden leave/payment in lieu of notice
- Termination payment (e.g. When payment will be made/amount/tax)
- Employee warranties (promises made by the employee)
- Confidentiality/reputation protection
- Any benefits the employee had (e.g. healthcare)
- Handover and practical steps
- Promises to your employer
3. Do I have to accept the Settlement Agreement?
If your employer has offered you a Settlement Agreement, you may be wondering whether you must accept what is on offer. It is a legal requirement that you receive independent legal advice on the terms and the effect the agreement might have on you. As part of the review we will discuss any employment law issues such as potential claims. If the departure is amicable, we can focus just on the terms, and we will help you decide whether to accept the agreement. Within the fixed fee service, we will also enter reasonable negotiations on your behalf.
The key issues to consider are:
- Strength of your claim, if you have one
- Your career and getting another job
- The costs and risks of litigation
- The advantages of settlement (e.g. tax, speed of payment, no legal costs and peace of mind)
If you have been offered a Settlement Agreement, speak to our specialist Settlement Agreement Solicitors. We will guide you through the process and ensure that you get the best offer for your circumstances.
Call us now on 02072477190 or complete our online contact form.
4. What are my options after being offered a Settlement Agreement?
Our Settlement Agreement Solicitors will advise you clearly on your options after being offered a Settlement Agreement. There are three main choices:
1. Accept the agreement
There are several advantages of accepting the agreement. They include closure, a clear structure for finding new work, no legal costs and of course, if you find a job quickly, then you may be much better off. This will normally bring your leaving date forward or sometimes you may be put on ‘garden leave’.
2. Negotiate the terms
Things to think about include:
- Do you have 2 years of continuous employment? Without this, you cannot bring an unfair dismissal claim. The Employment Rights Act 1996 is very clear about this
- If you do not have 2 years’ employment, you would need a discrimination or whistleblowing type claim in which case we would need clear information about the dates when events took place. You would need evidence to support these types of claims
- If you have a potential claim, how strong are the merits?
- How long will it take you to find another job? With low unemployment at present, this may only take a few weeks or months. The main part of compensation payments is future lost earnings and if you could a job in 2 months, for example, your losses would be capped at 2 months’ net pay
- The statutory cap on compensation is just over £80,000
Generally, it is better to negotiate from a goodwill point of view (rather than threatening legal proceedings) with a reasonable counterproposal. A sensible way to look at this is ‘pain to gain’- what will you have to put into a dispute and what will you get back? Then compare that with what is on offer.
3. Reject the agreement
If you have a strong case and your employer is unwilling to negotiate, you can decide, with the benefit of our advice, if you want to reject the agreement. You will then maintain your right to bring a claim against your employer firstly by lodging a form with ACAS (this must be done within 3 months of the incident or dismissal) and ultimately in an Employment Tribunal.
As part of the fixed fee, we will look at claims you might have and the kind of compensation you might be able to win.
5. What happens during the negotiation process?
Negotiations are usually done face to face, and sometimes during a ‘protected conversation’ where you can have a colleague or union rep with you.
It is important to state you are negotiating ‘without prejudice’ which means nobody can refer to the discussions in a legal case. As part of our service, we can take over the negotiations.
6. What are the standard terms of a Settlement Agreement?
Details of the dispute and the rights you are waiving
The agreement will normally prevent you from bringing any claims in an Employment Tribunal. You will still be able to bring a claim for pension or personal injury-related issues.
In return for giving up the right to bring a claim before an employment tribunal, you will receive a termination payment. Details of the payment including the amount, when the payment will be made, and any tax-related issues will be included in the agreement. This can be paid tax-free up to £30,000.
This may include payment of notice, holiday pay and payments of other benefits up to the last day.
The agreement will state your last date of employment and whether you are working your notice or being ‘in lieu’ (instead) of working it. When you are paid in lieu, your leaving date will be brought forward and you will be entitled to work the day after the termination date.
When there is a gap between signing the agreement, and leaving (for example if you are working on a handover project or serving your notice) your employer may well ask for a second certificate to be signed just before you leave and we will do with this within the fixed fee. We can have a look at your contract of employment to check this.
Non-compete, confidentiality, reputation protection and employee warranties
Your employer will want to ensure that their business is protected and so will include the clauses which continue after you leave. These normally relate to confidential information, reputations and poaching of clients or staff for a fixed period. The compensation payment is linked to this, so it is important that you keep to this.
The agreement may also include details of the handover process and any practical steps involved in enacting the agreement. Your employer will normally confirm the reference it will provide. Large employers tend to offer a standard reference and you may want to back that up with a personal reference from someone who knows you at work, such as a line manager.
7. What is a ‘protected conversation’?
Employers and employees are encouraged to have open discussions with a view to avoiding employment tribunals. ‘Protected Conversations’ are a special type of meeting in which the parties can speak about possible solutions or settlements without worrying about conversations forming part of a legal case.
A PC can be used to head of a claim for unfair dismissal or even constructive dismissal (where an employee resigns in response to the employer’s conduct). Many employers will, at some point, need to have a difficult discussion when things aren't working out and the usual improvement steps suggested by ACAS (informal and then formal warnings and monitoring) may only prolong the upset and even cause disruption. In some cases, employees under performance management can become nervous and this may make things worse. A dismissal after performance management may well make it much more difficult for an employee to move on and find a more suitable job.
PCs are an excellent opportunity to move straight to an outcome, which can normally be set out in a legally binding Settlement Agreement. For PCs to work, the parties need to have a basic understanding of their legal position to negotiate from a position of strength. Knowing how to deploy this without being oppressive or even annoying is a key skill. Also understanding the value of any compensation and how to minimise losses can be key.
You will need to know what evidence to have to hand. In a negotiation, this can only be hard-hitting and relevant. We can help you isolate your strongest points.
Each year over 95% of our cases are settled and many of these are sorted out promptly without unnecessary legal costs.
8. What is a pre-termination negotiation?
Pre-termination negotiations are any conversation between an employer or employee before the termination of employment, where the aim of the conversation is to agree on the terms of the termination.
PCs can only be used in relation to potential claims for unfair dismissal. Pre-termination negotiations between an employer and an employee are still admissible in any other type of legal case. In addition, even if the claim is for unfair dismissal, a conversation can lose its protected status if it is alleged that 'improper behaviour' has taken place. Improper behaviour can be by either the employer or the employee and can include:
- Harassment, bullying or intimidation
- Discrimination, i.e. Based on gender, race, age, sexuality, gender identity or another protected characteristic
- Any criminal behaviour
- 'Undue pressure', for example not giving an employee enough time to consider an offer or reducing its value the longer they consider it or threats to undermine an employer's reputation
9. Are payments for Settlement Agreements tax-free?
If offered, or offering, a Settlement Agreement it is important to understand the tax implications of what is on offer especially as this is an area that can, and has, changed recently. Calculating the tax that might be payable on a Settlement Agreement is not always straightforward.
Settlement payments of up to £30,000 are usually tax-free though this does not apply to all payments and the tax implications of any payment need careful consideration.
Recent changes involving the tax treatment of settlement agreements
Not only is this area of very complex, but it is also currently in a state of flux. Changes came into play in April 2018 which changed the approach in terms of tax in relation to certain types of payment.
Firstly, in order to understand what payments will attract tax, it is important to understand that payments under a Settlement Agreement will be of different types.
For example, if the payment relates to salary owed to you before the end of your contract of employment, this will attract tax. It is essentially just a payment of salary in the ordinary course of employment and therefore is taxed as salary normally would be. Holiday pay would also receive similar treatment. On the other hand, statutory redundancy payments are not liable to tax, up to £30,000. It is therefore important that you understand the distinction between different types of payment to understand when tax is owed.
The recent changes to the regime came in as of April 2018. The changes relate to payments paid in lieu of notice which are all now liable to tax and national insurance.
Clearly, it is important that you understand the context of the Settlement Agreement and what each payment relates to. It can be a confusing process – apportioning and calculating payments – however, our expert employment lawyers are on hand to offer guidance throughout the process. If you do not seek tax advice, you could be liable to an unexpected payment. It is therefore crucial that you seek appropriate advice.
10. Is the amount I’ve been offered fair?
- A Basic Award/Redundancy payment: this is fixed at £525 for each year worked under the age of 41 and £787.50 for each year over age 41. This award is capped at £20,000
- Notice pay: this is normally in your contract (please have this ready) but the minimum an employer can pay is 1 week’s net pay for each you have worked, to a maximum of 12 week
- Compensation: with an unfair dismissal, this is mainly made of gross lost earnings, capped at 1 year’s pay. Whatever your income the upper limit here is £86,444. With discrimination and ‘whistleblowing’ cases there is no upper limit on compensation, and you can also claim compensation for injury to feelings capped at £42,900 for very serious cases
Important! A tribunal will look very carefully at your efforts to find work (called ‘mitigation’). Unemployment is at its lowest since 1974 so you would have to a very good reason for claiming the maximum awards. Where the dismissal is neutral (e.g.: redundancy) then you might be expected to find work in say 6 months. If you have been made ill by the dismissal, your reputation is damaged or you are nearing retirement, the award might be larger to reflect this. If you find a job, then earnings would be taken off any award.
11. What are the different types of Settlement Agreement Payments?
Salary and benefits
Payments made up to the end of the contract of employment are subject to income tax and national insurance as they are part of normal earnings.
Any holiday pay is taxable as usual.
Payments in lieu of notice (PILON)
Payments in lieu of notice have been subject to changes of treatment recently and are subject to tax and national insurance (whether contractual or not).
Compensatory and ex-gratia payments
Non- contractual payments made for loss of employment are exempt from tax on the first £30000.
Both contractual redundancy payments and statutory payments fall within the £30000 exemption.
Payments made direct into pension schemes are separate from the £30000 exemption and they are not normally subject to tax though there are limits to the annual and lifetime allowances for contributions.
Contributions to outplacement services are not taxable and do not count towards the £30000 exemption. These payments are likely to be made direct to the outplacement provider.
Payment on account of a disability
When a payment is on account of a disability, injury or death the payment is tax-free.
Injury to feelings
Termination payments for injury to feelings attract income tax unless the injury arises from unlawful discrimination.
Payment of legal costs by an employer, direct to an employee’s solicitor, in respect of a Settlement Agreement is not usually subject to tax if it is solely in connection with the termination of employment.
12. Can my employer recover money that was paid to me if I break the Settlement Agreement?
If you breach an important term or condition before the severance payment has been made your employer can refuse to pay or even sue for repayment: for this reason it is very important that you understand the Settlement Agreement and keep to its terms including those which protect information and reputations. It is in your interests going forward not to unsettle the deal.
13. What happens if a Settlement Agreement is broken?
A Settlement Agreement is a legally binding contract and, therefore, the usual remedy would be for compensation for breach of contract, but a court can order a party to comply with terms such as those protecting reputations.
Employers normally comply with the agreement but if they don’t, we can enforce this for you under a ‘breach of contract’ action in the County Court but normally a sharp letter does the trick! This work is separate to advise on the agreement and under a separate fee structure.
An employer can recover monies paid if you break the agreement. Your employer could recover some or all the money paid to you, so we will explain your obligations as part of our advice.
14. What happens if an agreement cannot be reached?
Settlement Agreements are normally preferable to employment tribunals but sometimes it is not appropriate to sign…you may have suffered serious financial loss and the amount on offer may not reflect this. Things to think about are:
- How strong is your case? Do you have specific details supported by evidence and witnesses? Are the events recent?
- How long will it take you to find another job? Even if you have a strong case, you must show the tribunal that you have been looking for work. You can claim the difference between your old earnings and new earnings for a reasonable period (normally 1 year but longer in discrimination in whistleblowing or discrimination)
We can take on your case and will advise you on our fees for doing so. This would normally begin with a grievance and after that the ACAS and ET procedure which must begin within 3 months. Sometimes starting this can encourage a better settlement.
The ACAS process
If you wish to bring a claim, the first step is to inform ACAS regarding the details of your claim by completing the 'Pre-Claim Conciliation' form online. This normally lasts up to one month, and a neutral conciliator will try to reach a compromise. If this is not possible, then ACAS will issue a certificate confirming you have engaged in pre-claim conciliation – this will then enable you to bring an Employment Tribunal claim.
Issuing a tribunal claim
To start a claim we can complete the form (ET1). It is important to set out the factual allegations against your employer and correct details of your legal complaints. It is very important to get the facts and legal case right and we will advise you on this. The form must normally be lodged within 4 months (of the dismissal or complaint) provided the ACAS process has been followed.
The Tribunal will review the information you have provided and, assuming that your claim is accepted, will then forward this to your employer. They will then have 28 days in which to submit a formal response.
Employment Tribunal proceedings
The tribunal will set out directions on how the case will proceed. You will be notified regarding time periods for exchanging evidence – documents and statements. There will be a hearing normally within 8-10 months of lodging the claim.
At the hearing, the witnesses will be asked questions by the lawyer and the Employment Judge. In most cases, a judgement will usually be delivered on the same day as the Tribunal ends. In more complex cases, a decision may be sent out in writing, normally within a week or so.
Contact our Settlement Agreement Solicitors London, Canary Wharf, Birmingham, Manchester
If you require advice and assistance, contact our specialist Settlement Agreement Solicitors in London, Birmingham, Manchester today.
All we need is a copy of your agreement and your contact number to start advising on your case. Call us on a number below or fill in our online contact form now. Take the first step to resolving your issue today.
London: 020 7247 7190 | Manchester: 0161 850 4095
Birmingham: 0121 728 6518