Here is a list of questions we are often asked about settlement agreements, click on each question to find out more. Anything else you would like to know? Get in touch with us, your settlement agreement solicitors.
What is a settlement agreement?
A settlement agreement is a legally binding contract usually between your employer and you. It must be in writing and you must have independent legal advice in order to make the agreement binding and it is normal for your employer to make a contribution to your legal fees to allow...
Who should advise me about a settlement agreement?
In order for it to be a legally binding document you must have independent advice from a relevant independent adviser. This is normally a solicitor but s203 of the Employment Rights Act states that a relevant independent adviser can be a qualified lawyer or an officer, official, employee or member...
What are the tax implications of settlement agreements?
You normally give your employer an indemnity in respect of any tax due on the termination payment. It is therefore important that you understand the implications of this indemnity. A statutory redundancy payment will always be tax free and an ex gratia payment would normally be tax free subject to...
Can my notice pay be paid tax free under a settlement agreement?
The law changed in this area on 6th April 2018 to make all notice payments or sums attributable to the notional notice period taxable in full as earnings. This means that all notice pay is now subject to both tax and national insurance. It does not matter whether your contract...
Does my employer pay my legal fees under a settlement agreement?
There is no legal requirement for them to do so but it is custom and practice. We have only ever come across two such agreements without a contribution in all our year’s practising employment law and the hundreds of agreements we have advised on. To not do so is very...
What happens to my contractual benefits when I sign a settlement agreement?
This depends on the terms of your settlement. It is normal for benefits to terminate when your employment ends but sometimes these are extended for the period when you would have worked your notice. Even if the current settlement does not include these benefits it is possible for them to...
How quickly will I get paid under a settlement agreement?
This depends on the terms of your settlement. It is normal for payment of your salary to be paid as normal until your employment ends. Then the lump sum (often called a termination payment) is normally paid after your employment has ended but how quickly this happens depends on the...
When can I leave employment if I sign a settlement agreement?
This depends on the terms of your settlement. You will be told when your employment will come to an end. Sometimes this date has passed but it is often a future date. You will be paid until this date but this should be clearly set out in the settlement agreement....
Can you bring a claim after signing a settlement agreement?
The agreement usually states that it is in full and final settlement of all claims. If you issue a claim before the Employment Tribunal after you have signed the agreement your employer will reference the settlement agreement in its defence and the Tribunal is likely to say it does not...
Do I have to sign the first draft of the settlement agreement?
You certainly can but the agreement has been drafted by your employer or their solicitor to protect their interests. The rationale for getting independent legal advice yourself is so you can protect your interests or at least understand the risks. To give you an idea how rare it is we...
What are the typical clauses in a settlement agreement?
Each agreement is different but there are certain clauses you can expect to see in a settlement agreement although the wording can differ quite wildly from one to another. The sorts of clauses you would expect to see include: · A full and final settlement clause; · A clause saying...
I have had a settlement agreement before so can I just sign this one?
Although we try to make it as simple as possible we still have to satisfy our professional duties and take you through the agreement and ensure that we have given the statutory advice and you understand it. We are confident that other solicitors will also need to take you through...
What is meant by a tax indemnity in a settlement agreement?
It is common place for the settlement agreement to have a tax indemnity. This means that if HMRC decide that the termination or ex-gratia payment you were given by your employer as a tax free payment should have been taxed in full or in part then HMRC will contact your...
What are the alternatives to a settlement agreement?
This very much depends on why you were being asked to enter into a settlement agreement in the first place and whether your employment has already terminated. If you chose not to enter into a settlement agreement but you have been unfairly dismissed or have other employment related claims, you...
Why have I been given a settlement agreement?
Either your employment has ended and your employer is worried you will bring an Employment Tribunal Claim against them or more likely they wish you to exit the business without the worry of you bringing a claim against them. The reason for the proposed exit can vary, sometimes it is...
What is an ex-gratia payment under a settlement agreement?
An ex-gratia payment is a non-contractual payment - something beyond your entitlement to incentivise you to sign away your rights under a settlement agreement. It is tax free (for the first £30,000) but is often subject to a tax indemnity (see here). It can include your statutory redundancy payment in...
Why do I need to see a solicitor to accept a settlement agreement?
This is a requirement to make the settlement agreement valid. In order to be a valid settlement agreement you need to have independent legal advice from a solicitor or other person who meets the legal definition of a 'relevant adviser'. The rationale for having to seek independent advice is probably...
Should I negotiate my package under a settlement agreement?
Remember your settlement agreement has been written by your employer so it is important it benefits you too. We always take the view that it is better to ask and not get than always wonder what if. Sometimes clients instruct us that they are happy with the amount and do...
Do employers have to pay legal fees for a settlement agreement?
There is no legal requirement for your employer to pay you legal fees for a settlement agreement. As it is a legal requirement for you to take advice on the agreement it is normal for your employer to make at least a contribution to these costs. £500 plus VAT is...
What is a settlement agreement advisers certificate?
This is often a Schedule or Annex to the actual agreement. It is the certificate your solicitor will sign to confirm that they have given you advice as to the terms and effect of the agreement on your ability to pursue any claims you have. The certificate also confirms the...
What if my settlement agreement is not paid on time?
Assuming the agreement became binding then it becomes an open and binding contract between the parties. It is rare for the non-payment to be deliberate but it is often an oversight. You should chase the payment with your ex-employer direct or your solicitor who provided advice on the agreement could...
What is the process for a settlement agreement?
You or your solicitor will receive a copy of the proposed settlement agreement from your employer. You will both need to read it through. Your solicitor should go through the agreement with you to ensure you understand the terms and that they are fair to you. Either you or your...