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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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    Mark Q

    Five Stars I was most impressed by the attention, courtesy, speed and above all, professionalism in dealing with my Settlement Agreement. I would certainly have no problem in recommending this firm to anyone in need of their services.

    Posted 1 day ago

    Ade A

    I was surprisingly impressed by how Redmans Solicitors handle my case. From the moment I call them to the absolute end of my case, they always look after my best interest.

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    Malcolm P

    they were there when others were not

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    Anonymous

    Excellent service all the way through from start to finish. Really great support and guidance from the team, they secured the offer that I wanted. I can't recommend Redmans highly enough and will be sure to use their services again should the need arise.

    Posted 1 week ago

    Anonymous

    Efficient and quick service!

    Posted 3 weeks ago

    Karen B

    Quick response very helpful Issue raised dealt with very quickly

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    Carmen T

    Redmans give Great service and advice on reading contracts. They can explain all the solicitors jargon into words that you can understand. I received excellent service an I will use them again and again.

    Posted 3 weeks ago

    Anonymous

    Very grateful for Mel’s efforts in handling my case from start to finish which I would have found very stressful without it. She was very professional, friendly and we had a positive outcome. Highly recommend.

    Posted 1 month ago

    Nalin W

    Mel Chin was my Legal Executive when I engaged the services of Redmans Solicitors to help with a redundancy matter. She was incredibly approachable and professional from start to finish. Specially I have to mention regarding prompt reply to all my email queries, It was super quick. I would thoroughly recommend Mel Chin. Many Thanks

    Posted 1 month ago

    Anonymous

    I'd highly recommend Redmans Solicitors. Mel was very helpful and assisted me throughout my case.

    Posted 2 months ago

    Anonymous

    Sacha was very thorough and very helpful, with great advice on when to act and when to wait on my case.

    Posted 2 months ago

    Anonymous

    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!

    Posted 2 months ago

    Anonymous

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

    Posted 2 months ago

    Anonymous

    Very quick and professional service , Rana was very helpful

    Posted 2 months ago

    James G

    Very professional, knowledgeable and kept me informed at every stage of my case. I would highly recommend Redmans.

    Posted 2 months ago

    Pravina P

    Chris was really good and help solve my issues with current company. I would recommend him to anyone.

    Posted 2 months ago

    Paul L

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

    Posted 3 months ago

    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.

    Posted 3 months ago

    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 months 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.

    Posted 3 months ago

    Peter F

    Very helpful and clear advice, would highly recommend.

    Posted 3 months ago