May 28, 2023
There may be a time in your working life when you find your employment relationship between you and your employer is no longer working. It could be due to a difference in the way you work, company changes or a number of factors. When this does occur, you are going to want to bring an employment agreement to an end in a mutually agreed and civil way, ensuring it works out the best for both parties. This is called a settlement agreement, however, to ensure that this is mutually beneficial for both parties, there are things you need to consider when negotiating a settlement agreement.
Here, Premier Legal LLP have used our expertise to put together this guide together to help you through the process of negotiating a settlement agreement.
What Is A Settlement Agreement?
A settlement agreement is a legally binding agreement detailing the terms of your employment officially ending. It will detail your holiday pay, contractual benefits, tax indemnities, any legal costs and compensation payment you might receive. A settlement agreement is calculated by considering everything from length of service, any outstanding disputes and more. You can try our settlement agreement calculator to find out how much you could be owed. A settlement agreement concludes the employment relationship and means that you agree to accept the terms in full and final settlement of any claims that you may have against your employer arising out of your employment or its termination.
When looking for how to negotiate the best settlement agreement, these tips should help:
Define what you want to achieve through the agreement – The first and most important thing you need to consider is what you want to achieve. Think about what outcome is important to you and what you’d be happy accepting.
Ensure you do your proper research into the laws and regulations of your case – Prior to negotiating a settlement agreement you need to look into any laws and precedents that apply to your case. By doing so you’re in a better position to negotiate as you’ll have the proper knowledge to fight your corner.
Communicate clearly what you are looking for – Decide what you will be happy to accept and communicate this clearly and strongly. You want to stand your ground and have a good case for why you should be entitled to what you’re asking for.
Don’t accept the first offer – Often the first offer is to test the waters and see if you’ll accept, but the employer will have a higher one in mind. Make sure you turn down this first offer and see what else you can bargain with them.
Recognise the need to be flexible – While you need to stand your ground, it’s important to recognise negotiation is important. Be open to compromises and it will help you both to reach a mutually acceptable settlement without creating any bad blood between you.
Seek legal advice before finalising anything – While a deal might seem good, it’s important to consult a legal professional to check all is as it should be. They can read the small print and go over the details to check you’re getting a good deal and that there isn’t anything untoward in there. It is a requirement of a legally binding settlement agreement that you obtain advice from an independent solicitor as to the terms and effect of the agreement.
Make sure everything is documented – Having a document of all you’ve agreed is the best way to ensure there’s no discrepancies down the line. In this you should also include any amendments, additional provisions and t’s and c’s. The more watertight you have everything, the smoother the process and the quicker the resolution.
Set realistic deadlines for the process – If you don’t set deadlines, things can soon drag on for ages and momentum can quickly burn out. To avoid it becoming stagnant, set realistic deadlines that take into account any court-imposed deadlines as well as personal ones. Make these deadlines realistic and ensure you both agree on them.
Consider the costs and benefits, taking into account the overall impact it will have on you – When you accept the settlement agreement, there will be benefits in it for you, but also costs involved. Make sure you weigh up both and ensure you are happy with them before accepting the agreement.
Ask how the settlement will be taxed – The first £30,000 of compensation paid under a settlement payment isn’t taxed, but the excess will be at your appropriate marginal rate. Again, this is something you want to factor in when you accept it. Payments in lieu of notice, holiday pay and salary/bonus will all be subject to deductions for tax in the normal way.
To find out more about a settlement agreement and how we can help you, please get in touch with us at Premier Legal. We can help you get what you deserve. We will look over your settlement agreement and ensure it’s putting forward a fair deal. We can also help you negotiate better payments and terms and help you prepare for Tribunal should this be happening.
To get in touch, please give us a call, drop us an email or visit our website.