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In this article Chris Hadrill, the partner in the employment team at Redmans, gives his top ten tips for senior executives on negotiating an exit package (via a settlement agreement) from their employer

  1. Obtain copies of your contractual documentation
  2. Prepare yourself properly
  3. Make a list of your requirements for the settlement agreement
  4. Decide what additional benefits you’re seeking in the negotiations
  5. Choose your negotiating strategy carefully
  6. Draft an employment reference and departure announcement that you’re happy with
  7. Try and deal with your somebody in a position of authority when negotiating
  8. Carefully review the settlement agreement you’re sent
  9. Take specialist legal advice from an employment solicitor
  10. Know how far to push your employer

1. Obtain copies of your contractual documentation

Scan your files for a copy of the following documents, as applicable:

  • Contract of employment/service agreement
  • Confidentiality and intellectual property agreement
  • EMI share option scheme
  • Restricted Share Unit scheme
  • Shareholders’ agreement
  • Any separate commission, bonus agreements etc.

If you don’t possess copies of any of these documents (and they’re relevant to your employment situation) then ask the Human Resources department at your employer to send the documents to you.

These documents will be essential in determining what your contractual rights and obligations are as an executive, and will form an important part of the negotiations with your employer. For example, if there is a ‘non-compete’ clause in your contract of employment (or any other documentation) then you may wish to negotiate with your employer that this clause be waived upon completion of the settlement agreement.

2. Prepare yourself properly

I would recommend that you do the following as soon as possible:

  • Obtain copies of the relevant documents, as detailed above, as well as a copy of the settlement offer that your employer is making you (whether that is a settlement agreement or a settlement proposal).
  • Talk to your partner, if appropriate, and discuss what you feel about the offer; see if they have any useful input into the offer and what you should do.
  • Talk to former and current executive colleagues, if possible, in order to determine whether your employer has a standard package or negotiating strategy that they put forward
  • Get some formal or informal legal advice on your particular situation and how best to approach your negotiations

3. Make a list of your requirements for the settlement agreement

Decide what range of financial figures you would accept for the settlement agreement, and how this would be broken down – normally, you’re looking to be paid the following sums under an agreement:

  • Your notice pay (whether in lieu, on garden leave, or otherwise)
  • Your accrued but untaken annual leave
  • Statutory redundancy pay (if it is a redundancy situation)
  • Other contractual sums that you are owed (such as commission, bonus etc.)
  • Compensation for termination of your employment (this can be paid to you up tax-free up to a maximum of £30,000 – any compensation for termination of employment paid over £30,000 will be subject to tax but not employee’s national insurance (although your employer will pay national insurance contributions on any sums over £30,000))

The main ‘battleground’ for a settlement agreement is normally over what sum you will receive as compensation for termination of your employment. This is normally anywhere between one months’ gross salary and four months’ gross salary, but is sometimes lower or greater than these figures (depending on your circumstances). My normal advice (although this does not apply to all circumstances) is to put your ‘best foot forward’ with your initial offer (i.e. offer the most that you think you reasonably can get), with a view to this figure then inevitably chipped away at after negotiations with your employer.

4. Decide what additional benefits you’re seeking in the negotiations

In addition to financial remuneration some clients also want to try and negotiate additional benefits into their settlement agreement – these can include (but are of course not limited to):

  • Contributions towards outplacement costs;
  • Payment towards training costs;
  • Allowing you to keep your work laptop, mobile telephone, and/or mobile telephone number;
  • Extending your medical insurance coverage; and/or
  • Allowing you to keep your company car for longer

If you’re keen on obtaining these benefits then, again, you should put this forward at the beginning of the negotiations.

If you are a registered director of the business that you are leaving then it may also be a good idea to check that you’ll continue to be cover be covered by their directors’ insurance policy.

5. Choose your negotiating strategy carefully

In my experience it is, in almost all circumstances, better to approach a negotiation in the first instance with a ‘softly softly’ strategy – politeness, conciseness, and clarity are your friends in dealing with third parties; going in with an aggressive mentality will – unless the circumstances are quite exceptional – not only potentially alienate the person that you are negotiating with but may also harm your credibility in the negotiations. My experience is that it is normally a good idea to pursue the ‘softly softly’ strategy first, as you can always get ‘punchier’ at a later stage in the negotiations if you feel that you need to.

6. Draft an employment reference and departure announcement that you’re happy with

For many executives having agreed ‘messaging’ upon termination is a key issue in their departure, and it’s normally equally important for the employer. It is therefore a good idea to try and draft and agree the wording for a joint announcement at an early stage in negotiations, and to agree the wording for the reference that your employer will give to prospective employers upon request.

I would normally recommend that you draft a reference and announcement that you would be happy with at an early stage in your negotiations, and send that to your employer as early as is possible (and appropriate).

7. Try and deal with your somebody in a position of authority when negotiating

Negotiating a settlement agreement with your employer can often be as much political as it is legal – if you know the people that are making the decisions about your settlement agreement (which, as an executive, is quite often the case) then it is almost always a good idea to see if you can speak to them directly about it.

8. Carefully review the settlement agreement you’re sent

This may seem like a bit of a basic thing to write, but it is key – check that the settlement agreement that you’ve been sent incorporates the heads of terms that have been agreed with your employer, and that the terms of the settlement agreement as a whole reflects the tone and content of the negotiations to date.

9. Take specialist legal advice from an employment solicitor

You may not be surprised to read that a specialist employment solicitor is suggesting that you, as the executive, take advice from a specialist employment solicitor on your settlement agreement. However, it is almost always a good idea to at least get some preliminary advice from a specialist employment solicitor early in your negotiations for the following reasons:

  1. Specialists have the breadth and depth of experience and knowledge that you need in order to get the best possible settlement package from your employer – they know what to look for and where to look for it;
  2. Your employer will require you to speak to a qualified legal adviser to take legal advice on the terms and effect of the settlement agreement, and if you have to take advice from a legal adviser then it’s a good idea to speak to a specialist in the relevant field; and
  3. Your employer will almost always pay a contribution towards your legal fees, and they’ll therefore quite often cover off the cost of getting the specialist advice on your agreement

10. Know how far to push your employer

This is a key element in negotiations: know how hard to push and when, and when to stop. Continuing to push the (negotiation) envelope can often be adverse to the negotiations, as it may lead to a withdrawal of the settlement agreement offer (this is, in my experience, rare but possible), an increase in legal fees, and a potential deterioration of the relationship between you and your employer.

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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    Glyn B

    Provided a great service, covered all my requirements

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    Fidel A

    Redmans Solicitors recently helped me navigate a recent employment termination settlement agreement. Chris Hadrill is very professional and you will be in good hands with him. I score Redmans 4 out of 5 because things had to move fast and felt the team member assigned to my case wasn't very responsive at times. Having said that, I was very happy with the outcome and have no hesitation in recommending their services.

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    Nigel A

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    David L

    I was made a settlement offer by my employer to terminate my emplyment early. Redmans helped me understand the offer, and ensured that it was fair for someone in my position. They made a very stressful situation much easier. Excellent service.

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    Anonymous

    I can highly recommend Redmans. The service was professional and prompt and I would not hesitate to use them again. Thanks

    Posted 1 week ago

    Anonymous

    Overall I am satisfied with the performance from Redmans. The reason I have given 4 stars is that I had quite a lot difficulty in contacting the representative which was initially nominated for me. However, when I contacted Chris instead, he was excellent over the phone and secured a great outcome in short order. I would recommend Redmans Solicitors.

    Posted 1 week ago

    Anonymous

    Chris and Redmans were a great help. Effective and efficient, quick response from my first enquiry and then straightforward and attentive throughout with ultimately a positive outcome. I will use them again and recommend them.

    Posted 1 week ago

    Marie P

    Great service, quick responses, good advice and all in a no nonsense, no jargon manner. Would definitely recommend.

    Posted 2 weeks ago

    Anonymous

    Rana was amazingly thorough and professional!

    Posted 2 weeks ago

    Anonymous

    I am extremely happy with the legal advice I was provided with. My case was resolved to the best of my expectations. Thank you very much for your professional help.

    Posted 2 weeks ago

    Shahzad R

    Chris and his team were excellent. They provided sound advice and consultation that resulted in more cash than was offered. Would definitely recommend.

    Posted 2 weeks ago

    Sanjay B

    I would like to take this opportunity to thank Mel Chin, for all her support during my settlement process. Where she provided a professional service and was understanding. I would confidently recommend Redmans Solicitors to my friends and family. Thank you and wishing you all a Merry Christmas.

    Posted 4 weeks ago

    Paul O

    Excellent response time and communication during my dealings with Redmans

    Posted 1 month ago

    Gil T

    I don’t normally write reviews, but thought it was time on this occasion. Just wanted to say that I highly recommend Redmans - especially Rana Tandon, who helped me navigate around my employment contract. Rana was meticulous and thorough and all over my needs. Would I use Redmans again ? ..absolutely

    Posted 1 month ago

    Stephanie D

    Very thorough and professional service. I was very nervous about my employment case, as I had never dealt with anything like it before. However, the solicitors who handled my case made sure I understood everything. I was never kept in the dark and Redmans kept me constantly informed about what was going on with my case. I would definitely recommend Redmans Solicitors

    Posted 1 month ago

    Richard S

    Chris and Sacha were great throughout the entire process. Chris was very helpful once the initial discussions with my company began and before we agreed there was a case. Sacha was very responsive, patient and helpful throughout ensuring I felt I had the right information to make the best decision on next steps. A close friend and wife have both used Redmans in the past few years for unfair dismissals and the service continues to be first-class and I would strongly recommend them again. They definitely help reduce the anxiety that comes with uncertainty around new processes and situations. Thank you!

    Posted 1 month ago

    Jianya

    Very nice and patient went through the whole document with me.

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    Susan L

    Very helpful and led me through the redundancy process.

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    Jennice

    I was very impressed with the service that I received, and the speed in which it was handled. I would recommend them to a family member

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