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Chris Hadrill, a specialist employment solicitor at Redmans, answers the question:

“What payments should I expect to receive under a settlement agreement?”

There are two separate sets of questions in the above: firstly, what payments should you reasonably expect to receive under a settlement agreement based on your legal entitlement?; and, secondly, what payments do you expect to receive under the settlement agreement, regardless of your legal entitlement?

With regards to the first question, what you should expect to receive under your settlement agreement as a matter of law does depend upon the circumstances of your case: if you are being made redundant then, if you have been employed by your employer for two years or more then you can expect to receive at least your notice pay (if you are not working your notice), accrued but untaken holiday pay, and your statutory redundancy pay; if, in fact, performance concerns have been raised to you then you should expect to receive at least your notice pay and accrued but untaken holiday.

As a matter of practice, and in addition to the minimum payments you are owed, you should generally expect to also receive one or more of the following payments under the settlement agreement (this list is not exhaustive):

  1. Ex-gratia compensation
  2. Bonus payment
  3. Commission payment

Ex-gratia compensation

You should generally expect to receive a payment of ‘ex gratia’ compensation (also known as an ‘enhanced redundancy’ payment in redundancy situations) under your settlement agreement. The general purpose of this payment is to to compensate you for any losses that you sustain as a result of the loss of your job and/or to reflect the reasonable value of any Employment Tribunal claim that you may be threatening to bring. The exact amount of ex-gratia compensation that is reasonable and appropriate in any one settlement agreement will depend on a number of factors, including (among others) the nature, strength, and value of any Employment Tribunal claim that the employees is threatening to bring, how long the employee expects to be out of employment for, and the custom and practice of the employer in paying sums under settlement agreements.

Bonus payment

In order to qualify for a bonus payment you should normally have a contractual right (whether discretionary or not) to receive a bonus payment – this contractual right may be based upon an express verbal or written confirmation of your entitlement to a bonus (and generally how it will be calculated), or it may be implied by the employer’s conduct in similar situations. Sometimes an employee may not have a reasonable expectation of receiving a bonus (because there has been no agreement to such and/or no custom and practice of paying a bonus) but the employer may be willing to pay a sum to the employee in respect of a bonus – this is unusual but, equally, it is a matter of commercial negotiation between the parties.

It’s always wise to check your contract of employment and correspondence with your employer to check what has been agreed regarding bonus terms.

The issue of bonus payments under settlement agreements is also covered in this article.

Commission payment

If you are entitled to receive commission payments then your entitlement to such as well as the value of the commission payment you expect to receive should be recorded in the settlement agreement terms – a failure to include wording relating to such could preclude you from receiving such a payment if there is what is known as an ‘entire agreement’ clause in the settlement agreement.

As well as the payments listed above it is also generally a good idea to record in the settlement agreement all contractual rights and/or payments you expect to be able to exercise and/or receive upon termination of the contract of employment – for example, share options, long-term incentive plans, short-term incentive plans, and/or share schemes. Including in the settlement agreement the terms under which such contractual rights may be exercised will provide certainty to the parties relating to the exercise of those rights and prevent potential misunderstandings at a later date.

 

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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    Arabella B

    I am so grateful to Caroline Lewis at Redmans Solicitor’s for helping me with my Unfair Dismissal Case. I was seriously impressed how easy Redmans made the whole case, and am very happy with my Settlement. I have recommended your firm to at least 5 people in the last 3 months.. Thank you Caroline and everyone at Redmans. You are Brilliant .

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    Anonymous

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    Anonymous

    I used the services of Redmans solicitors and was a quick outstanding service I engaged them in a settlement agreement after been made redundant extremely professional at all that was done and would definetly use them again

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    Adrian A

    Spot on support, enough to get the matter at hand sorted. No beating around the bush, no nonsense - got the job done and we all moved on.

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    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.

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    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.

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    Quick response very helpful Issue raised dealt with very quickly

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    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.

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    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.

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    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

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    Anonymous

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

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    Anonymous

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

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    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!

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    Anonymous

    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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    James G

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

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    Pravina P

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

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