A settlement agreement is a legally binding document between you and your former employer. It allows you to leave employment with financial compensation and possibly other benefits. In return, it prevents you from raising an action against the employer in the employment tribunal or civil courts. If your employer has discussed the possibility of a settlement agreement with you, don’t hesitate to contact an employment law solicitor at Cavendish Employment Law. We’ll help you secure the best possible outcome to your employment dispute.
How is the Settlement Agreement Figure Worked out?
Ultimately there is no upper limit and the figure is worked out by way of negotiation, so it is up to you and your employer as to how much you should receive. There are various factors that will have an impact on how much you are likely to get:
- Income. The end of the employment relationship brings uncertainty regarding how long it will take you to find paid employment again. As a result, your settlement agreement should look at your annual income and reflect this in the sum it is awarding so that you can maintain your lifestyle until you find a new job.
- Age. This is an important factor if you are close to retirement age as your employment ending at this time in your life could mean it will be more difficult to find new employment and, as a result, you will need money to secure your living costs.
- Length of service. The longer you have worked for an employer, the more you should be awarded. This is for a number of reasons but also includes the fact that you will have acquired knowledge about the company over the years, which could be advantageous to competitors.
- Bonuses or commission due. Any bonuses or commission due to you should be a factor in deciding the settlement value.
- Payment in lieu of notice. Rather than working your notice period, you may prefer to receive the pay for the notice period as a cash lump sum, so that you are immediately released and able to join a new employer.
The first £30,000 of the settlement sum is tax free, whilst any payments for contractual entitlements (such as in lieu of notice, untaken annual leave or contractual bonus) will be subject to the usual deductions of tax and National Insurance. A settlement agreement is an alternative to an employment tribunal or court claim. When deciding which route to take, it is important to seek independent legal advice from an employment lawyer to analyse the strength of your case. However, it should be noted that in the event of pursuing a claim through the employment tribunal, the amount that can be awarded for unfair dismissal is capped at either £78,962 or 12 months’ gross pay depending on which is the lower of the two.
It should be noted that a settlement agreement is a collaboration between the employee and employer. If the sum sought through settlement by the employee is too high for the employer, they may withdraw from the negotiating process and prefer to take their chances at the employment tribunal, where the sum to be awarded could be far lower or nothing at all.
Additional Factors in a Settlement Agreement
There are a number of other factors that can be used when negotiating a settlement agreement depending on your circumstances.
Has there been any mistreatment of you by the employer? If this is the case, this will be a factor in achieving a greater settlement. Evidence and witnesses who are prepared to back you up will further strengthen your side in negotiations.
The financial situation of the employer is a further factor that can help in negotiations. Where an employer is in a strong financial position then they may be able to pay a higher price in the settlement agreement.
It is possible that during your time working for the employer that you have witnessed wrongdoing on the part of the employer which could be damaging if your knowledge became public through whistleblowing. If this is the case, employers may wish to include a clause in a settlement agreement to encourage you from not speaking out.
Legal representation is perhaps the biggest and most important factor in negotiating a settlement agreement. Experienced employment lawyers will be able to analyse the strength of your case and negotiate the highest possible settlement in your circumstances.
There are of course factors that can count against an employee in negotiating a settlement agreement. If there have been disciplinary procedures raised against you in the past, the employer could use this as evidence to reduce the amount you should receive.
Settlement Agreement Costs
It is important to get independent legal advice when making a settlement agreement to ensure your rights are adequately protected. In some circumstances, your employer may pay this for you; if not this will be an expense that you need to take account of. It may be possible to negotiate this as part of the agreement. Cavendish Employment Law will carry out the review of the terms of the Settlement Agreement for the amount of the employer’s contribution towards costs, so there will be no charge to you. If negotiations are required, these can either be included in this fee, or carried out for an agreed additional fee or on a no win no fee basis.
The absence of legal advice can result in an agreement being drafted that is to your disadvantage. Independent legal advisers will look at all of your circumstances to ensure any agreement proposed is fair to you.
Contact our Settlement Agreement Solicitors in London
If you’re facing any difficulties at work or if your employer has discussed the possibility of a settlement agreement with you, don’t hesitate to get in touch with us. One of our employment law solicitors will be able to advise you within hours of your call. To speak to a member of our team, call us on 020 7167 4800 or contact us online.