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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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Testimonials

4.78 Average

143 Reviews

Liz P

An excellent professional service was provided by Chris Hadrill and Mel Chin. Efficient and trustworthy - would highly recommend this company.

Posted 1 week ago

Anonymous

Redmans Solicitors were great. They were able to advice me quickly and efficiently! I would recommend them, as a good solicitors to use.

Posted 1 week ago

Anonymous

Extremely efficient. Mel made a difficult situation bearable and gave good clear guidance thoughout.

Posted 2 weeks ago

Anonymous

Thanks Chris and Sacha I was reassured throughout the process and a happy outcome

Posted 2 weeks ago

Edward F

Good and clear employment advice

Posted 2 weeks ago

Richard O

Chris at Redmans is my go-to legal expert when it comes to employee-related matters. His depth of knowledge, experience and considered approach to problems and their solutions is highly valuable. I cannot recommend Redmans highly enough.

Posted 4 weeks ago

Rory Y

They provide me with timely and clear advice!

Posted 1 month ago

Steven C

Redmans handled my settlement with my employer quickly, decisively and to a standard that I was very happy with. I would in similar circumstances contract them again

Posted 1 month ago

Deepthi K

Transparent. Clear communication. Prompt reply’s. Saves lot of time. Very satisfied.

Posted 1 month ago

Anonymous

Chris and Sacha did a fantastic job and negotiated a significant better settlement agreement

Posted 1 month ago

Dino D

I did get a very swift and god service from Redmans

Posted 1 month ago

Stephanie H

Clear, prompt, effective support from Chris which has been very much appreciated. Thank you again.

Posted 1 month ago

Anonymous

I would highly recommend Redmans Solicitors, the team were very friendly and my case was dealt with professionally and efficiently. Thank you!

Posted 2 months ago

Shane M

Very professional, welcome advice at a crucial time. Always available and reasonable cost.

Posted 2 months ago

Anonymous

My case was relatively straight-forward. But even so, working with Redmans was easy, quick, professional & clear. Many thanks

Posted 2 months ago

Anonymous

The team were very helpful and answered all my questions regarding my redundancy. Initially I had a call with one of the representatives who escalated my request to a suitable employment solicitor. We arranged a call to discuss the settlement and she helped answer all my questions. We then mainly contacted through email which helped resolve the settlement quickly and convently. Thanks for all the help.

Posted 2 months ago

Djaouida T

You have good communication.

Posted 2 months ago

Anonymous

Fast and professional. A highly recommended company for employment related issues.

Posted 2 months ago

Anonymous

Very professional service.

Posted 2 months ago

Brittany

I was very grateful for Redmans to treat my case with respect and discretion. At the time, I was very new to London and it was meaningful to have someone on my side and win the case for me. Without any doubt, I would definitely recommend Redmans Solicitors to anyone who is in need of it.

Posted 10 months ago

Jake L

Chris is very professional and calm. Very attentive and patient, been a positive experience having Chris represent me, and would recommend him.

Posted 11 months ago