Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

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

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

    Your first name (required)

    Your last name (required)

    Your email (required)

    Your telephone number (required)

    Brief details of your enquiry

    Testimonials

    4.79 Average

    274 Reviews

    Mary B

    I was very happy with the work Chris did for me. I believe with his help I secured a more favourable outcome both financially and in terms of clauses contained in the legal agreement I ultimately signed. I had utmost trust and confidence in the advice Chris provided throughout. Chris kept me informed at every stage and I found him very efficient at bringing matters to a conclusion without unnecessary delay.

    Posted 8 hours ago

    Mark M

    I found Redmans very easy to work with. Mel was very responsive, her advice led to an improved settlement. . Recommended.!

    Posted 3 days ago

    Anonymous

    Fantastic service. I would recommend Redmans to anyone who needed a Solicitor. The communication was second to none and consistent clear guidance was given.

    Posted 5 days ago

    Anonymous

    Everyone I dealt with at Redmans were professional, empathetic & always responded promptly and helped make the transition as smooth & efficient as possible for me. If you need legal advice, don’t hesitate & contact the team.

    Posted 1 week ago

    Anonymous

    Sacha was incredibly helpful and professional. Timely and accurate advice at a time I most needed it. I was extremely impressed and grateful.

    Posted 1 week ago

    Sue W

    The people at Redmans talk to you with respect and make you feel like they take your situation personal. They clearly care and are extremely professional. I have recommended Redmans to many people.

    Posted 3 weeks ago

    Anonymous

    Redmans Solicitors were consistently prompt, efficient and professional from the start of my reaching out to them for support in relation to contentious negotiations of an employment matter that continued for almost two months resulting in a positive settlement agreement. Chris Hadrill was diligent, thorough, empathetic and objective in his advice and guidance, showing deep and broad knowledge of the law and legal processes plus extensive practical experience in handling complex matters, resulting in clear and pragmatic advice in ambiguous circumstances that resulted in a very good outcome. I fully recommend Chris Hadrill and Redmans Solicitors! I have made this review anonymous purely because of the confidentiality obligations in the settlement agreement concluded.

    Posted 1 month ago

    Michelle W

    Redmans solicitors provided legal support and advice for a settlement agreement. Excellent customer service, very professional. The senior associate solicitor kept me updated throughout the process, showed empathy and the agreement was signed-off / completed within the agreed timeline.

    Posted 1 month ago

    Mark W

    Redmans Solicitors were extremely professional and helpful! Chris Hadrill handled my case and was an amazing help! His guidance, advice and understanding to my redundancy settlement were always clear, concise and very helpful and I am very grateful to him, and glad I found Redmans to help with my settlement. I highly recommend them!

    Posted 1 month ago

    Alison M

    Very happy with the advice I received

    Posted 2 months ago

    Margaret A

    I found everything about the company to be extremely professional and efficient. During my initial contact with Chris, he listened well and was reassuring, so I felt confident that my case would be well handled. Caroline was excellent at explaining all the legal points and answering my questions, as well as being very supportive and understanding throughout the process. I would definitely recommend this company.

    Posted 2 months ago

    Sanja K

    Very efficient and professional service.

    Posted 2 months ago

    Anonymous

    I found the advice I was given by Redmans Solicitors to be clear and useful and found the solicitor on my case to be both knowledgeable and approachable.

    Posted 2 months ago

    Karen T

    Great service. Thank you.

    Posted 2 months ago

    Anonymous

    Excellent service from Chris & Mel Chin. The best outcome was achieved from the redundancy process. They were extremely thorough, listened carefully and acted swiftly on my behalf. I highly recommend Redmans Solicitors

    Posted 2 months ago

    Shanine M

    Excellent service, thank you so much!

    Posted 2 months ago

    Anonymous

    I found Caroline and Chris very Helpful and provided excellent service. Caroline especially provided great legal advice and made me feel at ease with the whole process. I would highly recommend them. Thank you!

    Posted 2 months ago

    Gayle B

    Excellent company very professional would definitely recommend

    Posted 2 months ago

    Alex K

    Redmans provided an excellent service, timely and effective. Will definitely recommend.

    Posted 2 months ago

    Anonymous

    Great job done on my employment law

    Posted 2 months ago

    Dominica S

    Caroline & Chris were very prompt and efficient.Very happy with the service and will definitely recommend Redmans Solicitor to everyone !

    Posted 2 months ago