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 be points of negotiation with other amendments to the settlement agreement. Sometimes it is possible to retain a benefit for a period.

Holiday pay should be expressly set out in the agreement whether you will be taking holiday accrued but untaken before the termination date or whether you will be paid in lieu of that holiday. As holiday pay is a contractual benefit, it is taxable and should not be included in an ex-gratia termination payment or the lump sum unless it is separately listed and you pay the necessary tax on the same. Failing to deal with holiday even if it is an express statement that there is no holiday accrued but untaken can lead to risks with the tax indemnity you have given.

Healthcare can be very valuable if you have ongoing treatment in particular. It is sometimes possible to continue your current policy and pay privately if this is arranged before your employment ends. Alternatively, sometimes you can receive a payment in lieu of a benefit for the notice period. This can depend on the offer and your contract of employment.

The starting point for any advice should be that your solicitor will go through with you what your basic pay is and whether you have any other benefits. If they do not ask for this information you should set out to them any additional benefits you receive. Benefits could be anything from a company car or car allowance to share options and long-term incentive plans. Where you hold shares or have bonuses etc this can make the settlement agreement more complex as there is a need to ensure that all these elements are satisfactorily dealt with under the agreement. Shares, long term incentive plans and bonuses are often governed by an agreement or a written plan which sits outside your employment contract so there may be a need for your solicitor to review these additional documents as each scheme is different.

More FAQs on Settlement Agreements