Settlement Agreements - Negotiating a better settlement

Have you been offered a Settlement Agreement/exit package and do you want to negotiate a better package?

Often an employer will offer an employee a sum of money/package to terminate their employment with the company.  The employer would expect the employee to come back and make a counteroffer. 

Here are some top tips in order to obtain the best possible settlement for you:-

1. Prepare well for the negotiations. If you are called into a meeting and offered a Settlement Agreement, your employer may want a response straight away, but what should you do?

• Take your time – it is our advice that you ask for a few days to think about the proposed package being offered to you. After which, you should immediately obtain legal advice, think about what you have been offered and prepare a response.  It is apparent at this stage your employer does not want you working for them, so want to ensure you get the best possible outcome for yourself.

• It is important when considering a counteroffer that what you put forward compensates for the loss of your employment and your future loss as it could take you some time to find another job. If you feel that you have been discriminated against you also have injury to feelings which should be taken into account. We would recommend that you obtain legal advice to get the best package possible.

2. Decide on which negotiation tactics you should use.

• Where your employer is offering you a package less than you would be awarded at an Employment Tribunal, you may tactically want to tell your employer that unless they pay you more, then you intend to take this matter further to the Employment Tribunal.

• You could take a gentler approach by presenting to the company what you have contributed to the business, the difficult situation you will be in by losing your job, and the sacrifices that you have made to your personal life that have benefitted the company.

• Any settlement offer should be made on a ‘without prejudice’ basis or by a protected conversation. Discussions via a protected conversation are generally off-the-record which allows both you and your employer to speak freely without worrying the other party will use their words against them.

3. Think Carefully about the Offer. In the media you usually hear about large sums of money awarded by the Employment Tribunal.  You should not presume that you will get the same.  Negotiation depends on:-

• Your salary

• How long you have taken to find another job

• How long you have been employed

• Any terms of your contract that entitles you to receive an enhanced sum

• An injury to feelings.

4. Consider making a counteroffer - there is no harm in making a counteroffer at the top end of what you can reasonably expect. Worst case scenario is that your employer will negotiate you down.  However, if you ask for too much your employer will not take you seriously.

5. Do not ask for too little. Sometimes employees are too embarrassed to ask for more money even if it is reasonable, however do not get less than what you are actually entitled to.  Ensure that you are confident, respectful and courteous in order to get a settlement which you are entitled to.

6. Are the payments taxable? - Make sure you understand your tax position when considering the settlement offer, as sometimes you will not receive as much as you have presumed due to the taxable nature of the payment. This can be complicated, so you want to make sure that you obtain legal/financial advice in respect of this.

7. Consider non-financial matters. In most cases, settlement is a termination payment (financial package). However, the factors that you should take into account are:-

• You could agree a fantastic reference with your employer

• Keeping a mobile phone or having the number imported over

• Being allowed to continue using the company car for a certain period

• Prepare your own announcement to your former colleagues notifying them of why you are leaving

• Writing-off holidays which you may have overtaken

• Writing-off company loans

• Retaining company equipment such as your laptop

• Outplacement support

• Classed as a ‘good leaver’ for shares

• Extension of private medical insurance.

8. Obtain advice at an early stage. Lawson West offers a free initial consultation where you will be able to get advice on:-

• The amount of compensation you should be receiving

• The most tax efficient way to draft the agreement

• Whether you have any prospect of pursuing your claim before the Employment Tribunal.

9. Making a counteroffer. After you have made an informed decision, you should make your counteroffer either verbally or in writing.

Settlement Agreements can be extremely stressful and taking early advice is key. 

Depending on circumstances, Lawson West Solicitors has a proven track record in obtaining increased compensation in settlement agreements. So, if you have a Settlement Agreement or would like to approach your employers for a Settlement Agreement, then Lawson West Solicitors would be more than happy to guide you. Please contact one of our specialist solicitors.

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