Our Settlement Agreement Solicitors provide specialist help & advice for employees of all levels of experience.
- Fixed-Fee, Same Day Settlement Agreement service
- Experienced negotiators
- 30 years’ experience
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 a contract designed to bring employment to an end. Once signed, you cannot take any claims to an Employment Tribunal.
If you have been offered a Settlement Agreement you will need to take advice from an experienced Employment Law Solicitor. Your employer will pay a contribution (anywhere between £250 and £500 plus VAT) for our advice and we fix our fee to that. We never charge employees for this kind of advice.
As part of the fixed fee we'll look at any claims you might have and the level 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?
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'll deal with your Agreement the day we get it
With over 30 years’ experience, we can assess your legal rights quickly. Many employees are happy to sign straight away but if there are potential legal issues, we'll advise you on how this might affect the amount.
Why sign a Settlement Agreement?
In most cases, a Settlement Agreement is better than a claim. Here are some of the advantages:
- No legal fees (at a tribunal you won’t get your fees paid and these will reduce the amount)
- Tax efficiency- compensation can be made tax free up to £30,000
- Settlements protect your reputation by fixing the reference and preventing negative comments
- 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.
When considering a Settlement Agreement, there are both general and specific matters to consider. Each of these is set out below.
What's included in a Settlement Agreement?
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 from you to your employer (return of property, confidentiality etc.)
Do I have to accept the Settlement Agreement?
No you don't. 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
We will guide you through the process and ensure that you get the best offer for you.
Call us now on 02072477190 or complete our online contact form.
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' 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 also need evidence to support these types of claims
- If you do 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
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?
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.
What happens during the negotiation process?
Negotiations are usually via a ‘protected conversation’ where you can have a colleague or union rep with you or we can do it by phone.
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.
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.
What's 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.
Is the amount I’ve been offered fair?
- A Basic Award/Redundancy payment: this is fixed at £544 for each year worked under the age of 41 and £816 for each year over age 41. This award is capped at 20 weeks' pay.
- 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 weeks
- 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 £89,493. 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.
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 £30,000 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.
Compensation for disability discrimination
When a payment is on account of a disability or injury 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.
Can my employer recover money that was paid to me if I break the Settlement Agreement?
If you break 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.
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.
Contact our Settlement Agreement Solicitors London, Birmingham & Manchester
London: 020 7247 7190 | Manchester: 0161 850 4095
Birmingham: 0121 728 6518