Settlement Agreement – Employee

We provide settlement agreement advice to employees. If you are an employee who needs advice on a settlement agreement that you have been offered by your employer, we can help you. We also draft settlement agreements for employers. This means that we have built up experience of advising from both sides of the table and we can help you in advising on the important points in a settlement agreement. Sometimes it can be very unsettling when you are first offered a settlement agreement – we can put your mind at rest and ensure that you get the best deal.

There is a vast amount of ‘legalese’ in every settlement agreement; however you should consider the following 5 broad points before considering the detail:

  1. Are you being offered enough money? How long will it take you to find another job? Does the offer adequately compensate you? Does it cover not only salary but also benefits such as car or health cover as well as your bonus and any stock options?
  2. The agreement will be in full and final settlement of all claims. Do you have any other claims such as a personal injury claim? If so, the agreement needs to reflect this.
  3. Re-read your service agreement/ contract of employment. Will you agree to continue to be bound by any restrictive covenants or will you wish to try and amend them?
  4. Is the agreement structured in a tax efficient way? Income tax and NI will normally be deducted from your pay in lieu of notice (PILON). After PILON is dealt with and taxed, normally up to £30,000 of the remaining payment can be paid tax free.
  5. Finally, the settlement agreement is likely to have an ‘entire agreement’ clause. This means that only the terms in the agreement have legal effect. Make sure everything you want is in the agreement as nothing else will have any legal effect.

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