Settlement Agreements for employees
If your employer offers you a settlement agreement (previously known as a ‘compromise agreement’), you will need specialist legal advice to help you decide whether or not to accept it – and perhaps how and where it can be improved to your advantage.
Lodders’ dedicated employment solicitors can help you to negotiate a settlement agreement that achieves the best possible outcome for you in a quick, friendly and supportive fashion.
We have set out below some of the questions that our employment solicitors are typically asked by employees needing advice on a settlement agreement.
What is a Settlement Agreement?
Settlement Agreements are legally binding contracts which can be used to end employment on agreed terms, usually in return for some form of payment to the employee.
Why do I require independent advice from a qualified lawyer and what is your role?
It is essential to take advice so as to ensure the settlement agreement is valid and enforceable. Failure to take advice may result in you not having any recourse against your employer should they not adhere to the terms of the settlement agreement. As your lawyer, our role at Lodders will be to advise you on the terms of your Settlement Agreement and whether any changes are necessary to protect your employment rights. Furthermore, we will advise whether or not the terms will be negotiable. Therefore, depending on our advice you may not always sign your Settlement Agreement at the first meeting.
Do I have to pay tax on payments under the Settlement Agreement?
The terms of a settlement agreement will be different for every employee. In some cases, some or all of the payments payable 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.
What if I have a grievance against my employer?
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.
Do I need to book an appointment quickly with my lawyer?
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. Therefore, 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.
I am happy with my Settlement Agreement, and would just like to have it signed off. How much will it cost me to instruct you?
Typically your employer will make a contribution to your legal costs and will set this out in your settlement agreement. The amount will vary but often 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.