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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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Excellent service. It was a pleasure to work with Chris H, who is brilliant at what he does and very efficient. Their Senior Associate Rana T. is also very knowledgeable and resolves any queries speedily and efficiently. My issue could unfortunately not be resolved, but that was due to my employer and not the firm. Redmans however did all they could. I would definitely recommend them.

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Amazing, quick friendly service from Chris from the start and Caroline. They made me feel at ease during a difficult time, they understood and advised accordingly and I am really happy with the outcome of my case. Will always advise anyone who needs legal advice to contact Redmans, I’m so glad that I did and can confidently say I don’t think any other firm could have handled my case any better. Well done guys, wish you all the best and please keep doing what your doing, simply the best!

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Mark A

Excellent service - rapid and “to the point” advice given to ensure meeting the target time frame

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Anonymous

Chris Hadrill kept me sane during the negotiations with my employer. He was courteous professional and he cared about doing the best he could for me. I will use Redmans again if ever I need an employment solicitor. Excellent service.

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Muhammad Z

Awesome services. Professionals at their best .

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Anonymous

Thanks for the advice and for negotiating a good outcome. Good to have the support at a very stressful time

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Chloe F

My solicitor at Redmans was very helpful and efficient. Really pleased with the smooth service.

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Anonymous

Chris was absolutely excellent. Clear and concise, offering sound advice.

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Tim O

Experienced and competent advisors

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Rachel A

Quick and expert assistance. I would highly recommend Chris for any of your legal needs.

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Joe S

I was very happy with the service provided by Chris and the team at Redmans Solicitors. I felt very comfortable discussing all matters with Chris and am very grateful for all the help and guidance I was given throughout the whole process. I would definitely recommend Redmans Solicitors to friends and family!

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Anonymous

I had a very good experience working with Chris Hadrill during a difficult and emotional time. This held true from the moment I spoke to him on the phone, to the end of the process. Overall, he was attentive, professional and highly supportive. He provided sound advice and clarity. It was the reviews that led me to Redmans! I was very happy to know they were all true. I highly recommend working with Redmans Solicitors. Thank-you to the entire team!

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Good service

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Anonymous

Excellent professional service. Highly recommend.

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Rob O

Very prompt response and I could not fault the service. My solicitor listened carefully to the details of my case and I felt very confident in the advice I was offered. All emails and work done on my behalf with my former employer was of the highest standard and Redmans helped take a lot of the stress out of the situation for me.

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