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What is a Settlement Agreement?
Settlement Agreements (previously called Compromise Agreements) are legally-binding agreements which are often used to bring an employment relationship to an end.
A settlement agreement provides for a clean break between the parties. The effect of it is that you agree not to pursue any claims in the Employment Tribunal or County Court against your employer in exchange for a lump sum (often referred to in the settlement agreement as a ‘termination payment.’)
Why Have I Been Offered a Settlement Agreement?
Sometimes a settlement agreement can come out of the blue, in which case your first reaction might be shock. Losing your job, especially when it is unexpected, can leave you feeling confused, anxious and frustrated. Sometimes it is expected and is the culmination of a process of negotiation.
There could be a number of reasons why your employer
has suggested a settlement agreement.
They may wish to avoid having to go through the time and expense of following formal procedures, such as consultations and selections in redundancy situations.
You may wish to enter into a settlement agreement for the same reasons.
A settlement agreement may be offered as an alternative to formal disciplinary proceedings (e.g. where there is a performance or conduct issue about which there is disagreement).
Or perhaps you have agreed to part ways for personal reasons.
Whatever the reason Settlement Agreements are common nowadays and are confidential, legally binding documents. As well as compensation and payment of contractual benefits they can include a Reference which may assist in obtaining alternative employment.
Alternatively, there may be a amicable agreement between you and your employer to terminate the employment relationship. Perhaps you have decided to take early retirement.
A Settlement Agreement in these situations can provide a clean break with terms that are acceptable to both parties.
Redundancy and Termination by Mutual Consent
It is sometimes the case that an employee and their employer are in agreement regarding termination of employment - one example of this would be where you have asked for or been offered voluntary redundancy and you are happy to sign a settlement agreement in return for an agreed sum.
Settlement Agreements in redundancy situations are quite common nowadays and are generally straightforward, however not all agreements are contracts and so you will want to ensure that the agreement is formalised into a legally binding Settlement Agreement.
If necesary it can then be legally enforced.
Without Prejudice
Up until the time that a Settlement Agreement has been finalised it will be subject to the 'Without Prejudice' rule which means that (except in very exceptional circumstances) it cannot be produced in court in evidence as a Judge will not be allowed to look at it.
However, once an employee has taken legal advice, obtained an 'Advisor's Certificate' from his or her solicitor and the Agreement has been signed and dated by both the employer and the employee it the Agreement then becomes legally binding.
Settlement Agreement Solicitors
Settlement agreements are often complex, lengthy and heavy with legal jargon, usually because they have been drafted by the employer’s solicitors with the primary purpose of protecting their client.
It is therefore best to choose a lawyer who is experienced in reviewing and providing legal advice on settlement agreements to ensure that nothing in the small print is overlooked and that your interests are fully protected.
Same Day Expedited Service
If you need a quick turnaround, you've come to the right place! We would just ask that if you rquire our same day service you inform us the same day before 10.00am.
If the terms have been agreed between you and your employer we can provide the statutory advice, sign the Advisor's Certificate and email the Settlement Agreement to your employer the same day.
Frequently Asked Questions
What is a fair settlement?
This depends on a variety of factors, such as seniority, length of service and the circumstances surrounding termination of employment, eg if you have a strong claim, such as discrimination, and clear evidence to back it up it may be possible to negotiate an increase. However, payments should include salary and holiday pay up to the termination date, as well as any other contractual benefits, such as pension contributions.
The termination payment itself is usually equivalent to 1 - 3 months salary; although depending on certain factors, such as those set out above it can be up to 12 months. The first £30,000.00 of a termination payment is tax free.
Do I need a solicitor for a Settlement Agreement?
In order for a Settlement Agreement to be legal binding it is a requirement that you take independent legal advice from someone who is authorised to advise on settlement agreements. This would usually be a solicitor but a trade union representative can provide advice or advice workers who are authorised to do so.
What is the process for a Settlement Agreement?
The process is very straightforward. A solicitor will review the Settlement Agreement and answer any questions you may have. They will then advise on the nature and effect that signing the Settlement Agreement will have on your ability to bring certain claims against your employer once you have signed it.
How long does a Settlement Agreement take?
We are able to turn around Settlement Agreements the same day if required urgently – the Advice takes approximately 30 minutes although depending on complex agreements or renegotiation of terms it can take longer.
How much does a Settlement Agreement cost?
Standard fees range between £500.00 - £1,000.00 plus VAT.
Our average fees are £500.00 plus VAT for basic advice and for signing the settlement agreement. Where amendments/negotiations or same day turnaround is required, fees are £750.00 + VAT.
For more complex Settlement Agreements or where extensive negotiations are required fees average £1,000.00 plus VAT.
Do I need to come into the office for a Settlement Agreement?
No, we can advise over the telephone or Microsoft Teams and all documentation can be dealt with by email. If you prefer you can make an appointment for you to come into the office. There is free parking outside the office and close by for up to 1 hour.
Call us now - 01925 937070 or request a call back. We offer:
Straightforward advice on settlement agreements. No legal jargon.
Timely advice. Your employer will usually set a deadline for the settlement agreement to be finalised. If the deadline is not met your employer may withdraw the offer. We can therefore offer you an early appointment to ensure that deadlines are not missed.
Convenience of email or telephone consultations.
Our guarantee. Whilst your employer will insert a clause into the settlement agreement that they will make a contribution towards your legal fees you will want to be sure when choosing a legal representative that you do not fall into the trap of receiving an unexpected legal bill yourself. We guarantee that this will never happen if you choose us.
Transparency. In the unlikely event that the contribution from your employer will not cover our fees, we will (with your permission) contact your employer to seek an increase. If you do not wish us to do this or your employer refuses, then any additional fees will only be incurred by agreement with you in advance. We will only ever advise this course of action if the benefits to you outweigh the additional costs, so you will never end up out of pocket by following our advice.
How Much Money should I receive in a Settlement Agreement
Contractual payments
You will be paid all salary due to you up and including the termination date as well as other contractual benefits such as accrued holiday pay and payment in lieu of notice pay (PILON).
Bonuses can be included in the settlement - but are sometimes discretionary.
These payments are subject to tax and deductions for national insurance contributions.
Termination Payment
The termination payment is a compensatory payment as therefore the first £30,000.00 of the termination payment can be paid free of tax and without deductions for national insurance contributions. Redundancy payments are included in the tax-free lump sum.
Average payouts are usually equivalent to 1 - 3 months gross salary (in addtion to contractual benefits), however how much compensation (termination payment) you receive will depend upon a number of factors including:
Your level of seniority
How long you have been employed
The circumstances leading up to termination of your employment
If you wish to discuss a Settlement Agreement email diane@dsmlegal.co.uk, call 01925 937070 or complete our Contact Us Form and we will call you.
Employment References and Announcements
It can be useful, if you are going to be looking for another job, to agree a Reference with your employer in advance. This should be incorporated into the settlement agreement as, otherwise, your employer is not legally obliged to provide one.
In certain circumstances it may be appropriate to agree with your employer the wording of a formal announcement so that your colleagues can be informed about your departure in terms that you are happy with. This then needs to be attached as a schedule to the settlement agreement in the same way as an agreed Reference, to give it legal effect.
Employers will sometimes pay for outplacement support as part of the settlement agreement. This service can be useful if you feel you need to brush up your cv writing or interview skills, which is often the case if you have been in the same job for a number of years.
Settlement Agreements Compromise Agreements – Cheshire
Our office is based in Warrington but we are easily accessible from Liverpool, Manchester, Chester, Wigan, Newton-le-Willows, St. Helens, Widnes and Runcorn (Junction 8 of the M62).
However we do offer remote appointments by telephone or Zoom so it is not necessary for you to visit our office - all paperwork can be completed electronically which means that the whole process can be completed the same day.
You can contact us by email at info@dsmlegal.co.uk or by telephone on 01925 937070. Alternatively, complete our Contact Us Form and we will call you.
If you have been made redundant or have another employment law problem you can visit the Employment Law section of our website to find out more Employment Law at DSM Legal Solicitors.
Some examples of what can go wrong if you don’t take the right advice
Signing away all your rights.
In one case an employee inadvertently signed away his rights to pursue his ongoing personal injury claim worth thousands of pounds.
Taking the employer at their word.
An employee who signed a settlement agreement on the strength of what was promised by her employer was shocked when the employer refused to honour his promise. Unfortunately for the employee the employer was well within his rights to do this as the settlement agreement contained a clause which stated that the settlement agreement constituted the entire agreement between the parties and superseded any other agreement, whether written or oral.
Signing the settlement agreement on the assumption that that the employer won’t mind if the employee has found another job.
In some settlement agreements there will be a clause stating that the employee warrants that by signing the settlement agreement they have not been offered or accepted another job or any form of consultancy etc at the time of signing the settlement agreement which would provide them with any form of income. The employer here was well within his rights to demand repayment of the termination payment upon discovering that the employee had signed an untrue statement due to the fact that he had already accepted another job when he signed the settlement agreement. It is likely that the employee was not aware of the clause as it is one that is often overlooked.
A settlement agreement is a very effective way of enabling both parties to have a clean break and move on by creating certainty.
However, it is important that you fully understand the consequences of signing the agreement as once signed you will be taken to have read, understood and agreed to its terms and it can be very difficult, if not impossible to overturn.
Contact us today Your Local Solicitors in Warrington, Cheshire
Call now on 01925 937070 to speak to Diane or click here to complete our Enquiry Form to find out how we can help.