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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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    Paul O

    Chris & Rana guided me through a redundancy discussion. Prompt & patient assistance with the documents & meetings. Clear advice & fast responses regarding negotiations. Would definitely recommend & would use again without hesitation.

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    Anonymous

    Outstanding, efficient service. Thank you so much!

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    Mel and Chris were fantastic and supportive throughout! 1000% recommend.

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    Good efficient service.

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    Charles A

    Chris Hadrill was recommended to me when I found myself in need of a solicitor at very short notice. He contacted me almost immediately to arrange a call. Chris handled my case in a professional and timely manner and kept me notified throughout. Chris inspired confidence and made me feel I was being cared for. If ever I'm in need of legal representation, I would not hesitate to contact Chris. And will gladly recommend him to family and friends.

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    Rosalind R

    I was very happy with the service that I received from Redmans Solicitors. They were able to advise me accordingly with regards to my employment matter and stay within the agreed costing.

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    Karl B

    Caroline and Chris were so helpful and friendly. Couldn't of asked for a better service.

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    Dimitrios P

    Excellent, professional service, in time and within the expected value.

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    Barbara K

    Everything quickly and fairly. Very professional. Thank you.

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    Sabrina J

    I received a efficient professional service during the whole process of liasing between myself and my former employer to getting all forms signed and receiving my redundancy payment in full in the summer of this year.

    Posted 1 month ago

    Anonymous

    I received legal advice on a redundancy settlement agreement from Redmans Solicitors and was very impressed by the quality of their service. Chris Hadrill is highly experienced in settlement matters and was especially understanding of the particulars of my case, going out of his way to ensure that it was resolved quickly and with the utmost professionalism. I have no hesitation in recommending Redmans to anyone in need of employment advice and settlement resolution.

    Posted 1 month ago

    Anonymous

    Excellent service, with full explanations of everything needed. Both Chris and Mel answered all emails very promptly and were personable and efficient.

    Posted 1 month ago

    Anonymous

    I would like to thank Chris Hadrill, in particular who handled my case, for all his hard work, expertise and dedication. He listened with empathy and offered suitable advice, which made me feel valued and confident through a difficult time. I would highly recommend Chris and the team at Redmans Solicitors. Thank you.

    Posted 1 month ago

    Yann G

    Yann Guezennec / Chris Hadrill - Thanks for the detailed, informed and professional advice for my settlement. When comprise is the rule I felt we could have been maybe a bit more aggressive from the start. However an acceptable outcome considering the situation. Thank you

    Posted 1 month ago

    Valentina D

    Great service from Mel, she was very good at explaining every part of the settlement agreement and very efficient dealing with the HR team. Very professional team, I would definitely use them again in future if the opportunity came up.

    Posted 1 month ago

    Olaf S

    I was very happy with the service that I have received. Thank You Regards

    Posted 1 month ago

    Rebecca A

    I had a wonderful solicitor called Caroline who was so helpful and gave me all the information I need and explained everything in detail so I was crystal clear. Would highly recommend if you are in need of a solicitor!

    Posted 1 month ago

    Gareth J

    Very efficient, helpful and pragmatic support from Caroline. Happy to work with my requirements / suggestions but also made some very good points which helped to achieve a higher settlement amount. Would highly recommend Caroline and Chris.

    Posted 1 month ago