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Chris Hadrill, partner in the employment team at Redmans, answers the question: “I have been offered an employment settlement agreement – how much should I receive in the agreement?”

What is a settlement agreement?

Settlement agreements are, generally, a written agreement to provide an employee (or worker) with benefits (e.g. a payment of compensation, a reference, sometimes an apology) in return for the employee’s agreement that they will waive their right to bring such claims, or withdraw them if they have already issued a claim. See this post for a more in-depth analysis of what a settlement agreement is.

What payments should you (as an employee) expect to receive under a settlement agreement?

What you should expect to receive under a settlement agreement will, to a certain extent, depend upon the situation that you are in (for example, you can only expect to receive a statutory redundancy payment if you are being made redundant and have more than two years’ continuous employment). However, there are certain types of payments that I would almost always expect employees to receive under their settlement agreements:

  1. Salary and benefits to the termination date
  2. Notice pay: you should be paid in respect of your notice period (whether this is being paid in lieu for your notice, serving it out, or being placed on garden leave)
  3. Accrued but untaken annual leave accrued to the termination date: you should receive a payment in lieu of any holiday days accrued but not taken to the termination date
  4. Contractual sums owed to you to the termination date (e.g. bonus, commission etc.)
  5. Compensation for the termination of your employment: you will almost always receive a sum of money as compensation for the termination of your employment under a settlement agreement (also known as an ‘ex-gratia payment’. The value of this sum will depend upon a variety of factors (for example, the industry you work in, the strength of your clams, your seniority etc.) but, as a (very rough) rule of thumb I would normally expect for an employee to receive between two and three months’ gross salary as compensation for the termination of their employment

As well as the above payments, you can also usually expect to receive certain other forms of payment through a settlement agreement (dependent on your circumstances):

  • A contribution towards your legal costs (normally £500 plus VAT, but this can be in the thousands of pounds if you are a senior employee)
  • A contribution towards the cost of outplacement services
  • Coverage of training costs, in some circumstances
  • Coverage of relocation costs, in some circumstances (e.g. the cost of transporting your personal belongings, airplane tickets etc.)

What should you do if you think that the terms of the settlement agreement are unfair?

If you think that the terms of the settlement agreement that you have been offered are unfair then the normal appropriate course of action is to negotiate the terms of the agreement: you can either do this yourself or you can instruct a solicitor to do it for you. I would always recommend that, prior to instructing a solicitor, you have a thorough initial assessment of your matter and your settlement agreement undertaken – firms of solicitors normally will do an initial consultation for no charge.

About Chris Hadrill

Chris is a specialist employment lawyer at Redmans. He specialises in contentious and non-contentious employment matters, including breach of contract claims, compromise agreements and Employment Tribunal cases. He writes on employment law matters on a variety of websites, including Direct 2 Lawyers, Lawontheweb.co.uk, LegalVoice, the Justice Gap and his own blog. Contact Chris by emailing him at chadrill@redmans.co.uk

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    I have been very pleased with the support I got from Redmans Solicitors on my case with my employer. Caroline has always helped me to put things in perspective and showed me different scenarios ultimately to help me taking the right decision. She was very professional and always available when I needed, and at the same time also emphatic which I found also really important to establish a strong relationship. Will definitely recommend!

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    Prompt and efficient response to my enquiries. Excellent negotiating skills with my employer which considerably improved the terms of my settlement agreement.

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    Sacha was extremely helpful in my matter. I would not hesitate you use Sacha or Redmonds again. Everyone was very helpful.

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    Monique N

    I had Mel Chin helping me with a settlement and she was very professional and reliable throughout my case. Mel provided me with a good understanding of what was happening and gave suggestions on routes I could take. My case was resolved and closed promptly although the opposing side were very difficult to deal with. A very big thank you to Mel and Chris.

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    Jackie C

    My first ever experience needing the services of a solicitor; cannot speak highly enough of Mel and Chris’s personable, reassuring and straight to the point advice in dealing with my settlement agreement. They put me at ease during an extremely stressful time. I am equally as happy with the outcome, as l am their professional services.

    Posted 3 weeks ago


    Really happy with the service. All very efficient. Mel rattled through things very fast, however was great whenever I needed to stop and ask a question! Would definitely return to Redmans if I ever needed Legal advice.

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    Very helpful and clear advice, would highly recommend.

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    Second time I have had to use Redmans. They did not disappoint. They are fast , efficient and friendly. I have already recommended them to friends and colleagues. I hope I dont have to use them again but if I have to , they are the solicitors for me.

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    Extremely helpful, starting from a request for advice at very short notice, to dedicating time for me to understand and review all documents thoroughly.

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    Sophie R

    Very efficient and professional service. Chris was very empathetic, knowledgeable and personable. Highly recommended.

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    Melanie M

    Very happy with the detailed advice provided from Redmans. They also helped me to secure a higher settlement than originally offered by my employer and were extremely diligent. I first spoke with Chris at relatively short notice and then Sacha dealt with my case. Would definitely recommend and use again in the future if needed.

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    Redmans helped me with a work related issue, which was resolved quickly and professionally. I would definitely recommend this company.

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    My case was handled by Sacha who was very thorough and helped me to achieve a good outcome with my employer. Sacha was very personal, professional and helped me during quite a stressful time, so I am hugely grateful to her and to Redmans. This was my first time engaging with a law firm so I wasn't sure what to expect but I can definitely say that it was a good experience overall and I ended up better off due to having the help of an experienced and proactive solicitor on my side.

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    So grateful that I contacted Redmans to deal with my Redundancy Agreement. Everything from the initial call to the completion of the matter was professional, efficient and effective. I was listened to, had everything explained simply and kept informed of every step. I received super advice and the costs were very competitive. I would highly recommend them to anyone seeking similar help. First class service - thank you

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