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Chris Hadrill, the partner in the employment team at Redmans, gives his analysis of what he thinks are the top 10 pitfalls to employees negotiating settlement agreements

  1. The timing of the termination – making sure it works for you
  2. The value of the ex-gratia payment – increasing it as much as possible
  3. Dealing with notice pay properly
  4. The proper use of confidentiality clauses
  5. Dealing with bonus payments
  6. Checking your contract of employment for restrictive covenants
  7. Making sure you’re paid benefits (pension contributions, healthcare etc.)
  8. Provisions relating to confidential information
  9. Not obtaining independent legal advice from a suitably-qualified adviser
  10. Not getting a contribution to your legal fees from your employer

The timing of the termination – making sure it works for you

If you’re being offered a settlement agreement then you should ensure that the timing and method of the termination works for you. There are generally three methods of terminating employment via a settlement agreement: 1) working out your notice period; 2) going on ‘garden leave’ for your period of notice; and 3) your employment terminating (almost) immediately and you being paid in lieu for your notice period.

Carefully review your situation and determine what’s best for you: one mistake that employees make is often just accepting that their employer will make them work out their notice period; you may be able to negotiate being placed on garden leave for a period of time or, alternatively, that your employment terminates asap and that you be paid in lieu of your notice pay.

The value of the ex-gratia payment – increasing it as much as possible

The principal benefit of a settlement agreement to an employee is normally the amount of tax-free compensation that they will receive under the settlement agreement. This ex-gratia amount may not always be negotiable, but it normally is: the fundamental principle of negotiating settlement agreement payments is generally “if you don’t ask, you don’t get”. It’s therefore generally worth approaching your employer to see whether the value of your ex-gratia payment can be negotiated (your solicitor may be able to help with this).

Dealing with notice pay properly

On 6 April 2018 the law relating to taxation on notice payments changed: employers must  now tax as “general earnings” a portion of a termination award equivalent to the basic pay an employee would have earned had the employee served his or her notice in full (this has been called “post-employment notice pay” (or “PENP” for short)).

A failure to deal with the new tax provisions properly in settlement agreements could potentially cause tax problems for both the employer and employee in the future, so it’s normally important that the settlement agreement identifies the sum that would have been earned had the employee served their notice in full and states that this will be subject to tax and National Insurance.

The proper use of confidentiality clauses

In the wake of the Harvey Weinstein scandal a great deal of focus has been placed on the proper use of confidentiality clauses in settlement agreements – for example, the SRA has recently issued guidance that confidentiality clauses in settlement agreements shouldn’t allow law firms to hide discriminatory or harassing behaviour.

If your employer has engaged in serious misconduct (whatever this is) and you are being offered a settlement agreement then you must consider whether the confidentiality clauses in the settlement agreement are right for you in your circumstances – the best thing to do is to discuss this with your legal adviser.

It should also be noted that settlement agreements cannot and do not prevent employees from making protected disclosures (e.g. disclosures showing that their employer’s conduct has breached the criminal law, breached a civil legal obligation or breached environmental standards) in the public interest.

Dealing with bonus payments

If you normally receive a bonus payment in the course of your employment then you should check your contract of employment (or bonus scheme, employment handbook etc.) in order to determine what criteria you need to meet in order to qualify for a bonus payment upon termination: a lot of employers impose a condition on bonuses that you must be in employment as of a particular date in order to qualify for a bonus in a particular tax year, so if your employment terminates prior to that date it can sometimes make it difficult to argue that you should receive a bonus. It is normally worth approaching your employer, however, to see what you can negotiate regarding your bonus.

Dealing with shares, share options, and RSU’s

If you are entitled to shares in your employer (or you have share options or Restricted Share Units (“RSU’s”) then it is normally a good idea to reference the terms relating to those shares, share options and/or RSU’s in the settlement agreement, as well as how they will be dealt with post-employment, so both you and your employer are clear on how the shares will be dealt with and what will happen.

Making sure you’re paid benefits (pension contributions, healthcare etc.)

A mistake that employees often make with settlement agreements is not checking their contract of employment to see whether they are entitled to be paid in lieu for benefits (if they are being paid in lieu of notice): most contracts of employment state that the employee will normally only be contractually entitled to salary payments if they are paid in lieu of notice, but some contracts of employment are silent on this point or expressly state that the employee is entitled to both salary and benefits (pension contributions, healthcare etc.) if they are paid in lieu of notice – this could involve the employee being entitled to use these benefits for the period of notice that they would otherwise have served (e.g. use of company car, healthcare coverage) or being paid in lieu in respect of some benefits (e.g. employers’ pension contributions, car allowance).

Checking your contract of employment for restrictive covenants

“Restrictive covenants” are, to give a rather brief summary, clauses that restrict an employee’s ability to undertake alternative employment (both during employment and post-employment) or that restrict employees from being able to poach clients of their employer or former colleagues after their employment terminates.

Sometimes employees are unaware that they are subjected to restrictive covenants , or they don’t know what effect restrictive covenants in their contract of employment may have. The first thing that you should do is check your contract of employment (and any other relevant documents) to see whether you are bound by restrictive covenants and, if so, what those mean. It’s a good idea to speak to your legal adviser about the covenants.

Not obtaining independent legal advice from a suitably-qualified adviser

There is a legal requirement that you obtain independent legal advice from a legal adviser on the terms and effect of your settlement agreement in order to render the settlement agreement enforceable; a failure to obtain independent legal advice from a suitable legal adviser will generally render a settlement agreement unenforceable.

If you’re offered a settlement agreement then it’s normally recommended that you approach a solicitor (or another suitably-qualified independent legal adviser) to discuss your settlement agreement with them – specialist employment solicitors will generally have a great deal of experience advising on settlement agreements, and should be able to help you considerably with advising your agreement.

If your employer tries to force you to sign a settlement agreement without making you aware that you should receive independent legal advice first then you should immediately point out to your employer that you should have the benefit of legal advice prior to signing.

Not getting a contribution to your legal fees from your employer

It is not a legal requirement that an employer make a contribution towards your legal fees, but in practice most employers will (for a number of reasons) offer a financial contribution towards the cost of you receiving legal advice on your settlement agreement (this contribution will normally be between £250 plus VAT and £500 plus VAT in value, although it may be more in some circumstances). If your employer is not offering a contribution towards your legal fees then approach your employer and negotiate this.


Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees Call 020 3397 3603 to speak to one of the members of our employment team or email us on enquiries@redmans.co.uk. Redmans have offices in Richmond, Chiswick, Hammersmith, Fulham, Kingston, Wimbledon, Ealing, Kings Cross and Marylebone (meetings strictly by appointment only).

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    371 Reviews

    Jonathan L

    The service I received was friendly and professional. I appreciated the timely communications and Mel was always available for any questions I had. I'd definitely recommend Redmans and will use them in a heartbeat should the situation arise again.

    Posted 4 days ago

    Glyn B

    Provided a great service, covered all my requirements

    Posted 4 days ago

    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.

    Posted 5 days ago

    Nigel A

    Chris Hadrill is hugely impressive - the right blend of assured calm and savvy professionalism. I've already recommended him to friends and family.

    Posted 6 days ago

    Matt O

    I was hugely impressed with the ease of being able to work with Redmans Solicitors and their professional approach. Mel was really clear around the process, and costings required and I felt comfortable throughout. I would certainly recommend.

    Posted 6 days ago

    Bryan G

    Great response, and also happy to assist

    Posted 6 days ago

    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.

    Posted 1 week ago


    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


    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


    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 2 weeks 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


    Rana was amazingly thorough and professional!

    Posted 2 weeks ago


    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 1 month 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


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

    Posted 1 month ago

    Susan L

    Very helpful and led me through the redundancy process.

    Posted 1 month ago