Lodders has experience across the board, helping employees of all levels negotiate a satisfactory exit package. Led by Damian Kelly, speak to our expert team for advice regarding settlement agreements today.
Lodders’ employment law specialist, outlines the steps you should take…
October 31, 2021
Lodders has appointed Damian Kelly as head of employment law.
October 31, 2021
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Not sure that this is the service for you? Take a look at some of our frequently asked questions for more information.
A settlement agreement, (formerly known as a compromise agreement) is a legally binding contract that can be used to end employment on agreed terms, usually in return for some form of compensatory payment to the employee.
Settlement agreements are often utilised when multiple parties are unable to resolve disputes amongst themselves or cannot mutually agree upon terms or need legal clarification to protect all those involved.
Settlement agreements can deal with a range of issues including:
• Issues arising out of notice periods and payment in lieu of notice provisions
• A structure resulting in the optimum tax structure
• A commitment to provide a reference in an agreed form
• The impact of any restrictive covenants and how to deal with these
• How to deal with employment related shares or share options
We will ensure you understand what the terms of the settlement agreement mean and how they will affect you, and that you obtain the most favourable compensatory amount for the termination of your employment in the most efficient manner. We will also ensure the document is drafted so as to protect your interests and, in so far as is possible, remove any restrictions on your future conduct.
In our experience, the production of a settlement agreement is often the start of the negotiation and not the end. After all, a party’s first offer is rarely its best offer!
Here at Lodders, we have forged a strong reputation acting for employees who have found themselves in a position where parties are seeking to terminate the employment. We can offer fast, effective and focused advice to secure the best exit agreement.
Specialists in senior level and director settlement agreements, our team of dedicated lawyers can help you negotiate the best exit package, including bonuses, restrictive covenants and shareholdings.
Our work in this area was recognised by legal industry bible the Legal 500 2017 report, which stated that Lodders ‘is particularly adept at acting for senior directors, high-net-worth individuals and former sportsmen. The team has in-depth knowledge of termination issues, particularly exit packages, in relation to senior employees, directors and stakeholders.
In negotiating the terms of any severance, we will always also seek to protect our client’s position and their ability to acquire alternative employment with the assistance of a solution which not only includes an optimum commercial outcome and the most compensation possible; but that includes a favourable reference and the absence of restrictions on the client’s post-employment conduct.
Our substantial experience also assists us in structuring the termination package in order to provide the most attractive and efficient conclusion in terms of the tax payable (or not payable) by our client in connection with the compensation for loss of employment.
It is essential to take advice to ensure the settlement agreement is valid and enforceable. If you don’t, you may not have any recourse against your employer should they not adhere to the terms of the settlement agreement. Depending on our advice you may not always sign your settlement agreement at the first meeting.
The terms of a settlement agreement will be different for every employee. In some cases, some or all of the payments to you under the agreement may be payable without deductions for tax and/or National Insurance. For example, if you receive compensation for your loss of office then the rules state that the first £30,000 will be tax-free. Further, any sums to which you are contractually entitled are taxable.
If you have any queries relating to the termination of your employment, then these must be brought to our attention before we can advise you on your settlement agreement as we may be able to assist your case further. Under the terms of the settlement agreement, you are obligated to inform your lawyer of such information, which, if known to your employer, may have affected the terms of their original offer.
There will be deadlines set out in your settlement agreement which you must comply with, or you run the risk of your employer withdrawing their offer. It is important to act quickly and book an appointment to speak with a lawyer. At Lodders we will always ensure that a member of our employment team can meet with you at short notice – either in person or over the telephone to suit you.
It is another term for settlement agreement.
You do not have to accept a settlement agreement, but you can often still be dismissed by your employer regardless.
If you turn a settlement agreement down, you may be able to bring a claim against the employer, but it is not guaranteed you will be awarded as much money as you were in the initial termination agreement. It is therefore important to seek out legal advice when you are offered a redundancy agreement.
When it comes to negotiating a settlement agreement for our clients we look at protecting their position as much as possible, as well as their ability to acquire alternative employment, such as gaining a favourable reference, etc.
Typically, your employer will make a contribution to your legal costs and will set this out in your settlement agreement. The contribution is typically between £250 and £500 plus VAT. We will always inform you as to whether or not your entire consultation will be covered by your employer’s contribution at the earliest opportunity.
Lodders is a well-established law firm that has both regional and national coverage, with a huge team of experts and highly skilled staff.
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