If you’re happy with your settlement agreement, you can skip to our fast advice service. But if you’re not happy with the deal, we can help give you strategic advice on your options. Here’s what to consider…

How to negotiate the best settlement agreement

Assess the deal

Before you begin a negotiation, you need to assess how good a deal you’ve been offered in the first place. If your employer has made you an enhanced offer and the terms are fair and reasonable, then you don’t want to play hard ball – potentially losing goodwill with your employer – when your chances of success are very low. The best way to assess the merits of your case is to seek specialist legal advice and find out whether you should be negotiating at all.

Why is your employer offering a settlement agreement?

Once you understand the reason that you’re being offered a settlement agreement in return for losing your job, you can understand any leverage you might have and your bargaining position.

If your role is being made redundant (the key here is whether you are being replaced), then compensation is likely to the statutory redundancy amount. However, a settlement agreement is usually offered a swift exit for the employer and employee. So, perhaps your employer will consider an enhanced payment to cover the amount of time if would take to go through a redundancy consultation.

However, if you are being offered a settlement agreement because the alternative is your employer taking you down a performance management process (because your employer is not happy with your work) you need to assess how fair this is.

If you’re in an unfair dismissal situation, you could make a claim against your employer and potentially, take the firm to an Employment Tribunal. This can be a time-consuming and costly business. So, it may be that an employer will offer you an enhanced deal, if you negotiate hard but reasonably on this point.

Who are you negotiating with?

negotiating termination severance paymentAn obvious but very important question. You may not have a choice about who you are talking to about your settlement agreement deal.

But if you do have a choice you should think carefully about who’s most likely to be sympathetic to your cause and/or have the biggest interest in resolving the matter quickly and amicably.

 Has your employer allowed for all entitlements?

There may be quick ways to up the deal, if you feel the financial compensation is too low. Find out everything you are entitled to and that your employer has included these in the deal. For example, this can include holiday pay, bonuses, commissions and redundancy (if it’s a redundancy situation). If you need help to negotiate on these points, we can do this on your behalf.

Can you negotiate a termination date further into the future?

It can take time to find a new job and it can be easier to find work while you are already in a job. So, here’s another way to negotiate. You can ask your employer to extend your employment by making your termination date further into the future. This means you will be paid for longer, will accrue more entitlements (such as holiday pay) and will have longer to find a new job, while you are still technically and legally employed.

Can I negotiate not to work notice?

Once you know you are leaving, it may be possible to use your settlement agreement discussions to leave work earlier. It may be worth doing this if you have another job to go to or want to use your settlement agreement payment to change careers, take time to travel or retrain, for example.

Can I remove or reduce my restrictive covenants?

Restrictive covenants are put into employment contracts to prevent an employee from competing with an ex-employer after they have left a business. They typically also cover access to the ex-employers’ clients or customers. For example, your contract may stop you from soliciting or working with clients that you worked with while you were employed. It can be worth negotiating on restrictive covenants or asking a specialist employment solicitor to do so on your behalf, because it makes it easier to find new work.

Can my settlement payment be tax-free?

The first £30,000 of settlement agreement compensation payments can potentially be paid tax free, in England and Wales. Generally speaking, other payments – such as those made in lieu of holiday or salary – will be taxable as earnings as they would typically be. Unless you work your notice, a payment in lieu of notice will be subject to income tax and national insurance deductions.

One way of negotiating an enhanced deal is to see if the employer can pay you in lieu of notice rather than make you work it or be put on garden leave. You should take advice from your solicitor on your particular situation.

Need some help negotiating with your employer?

Sometimes you stand a better chance of securing the best deal if an employment solicitor handles the negotiations with your employer. If you’re worried about the costs of a solicitor then don’t be. Give us a call and our solicitors will have a no obligation chat about your best options. This initial advice is always free!

How much does a Solicitor Cost?

Our panel of solicitors regularly take on negotiating cases for employees where their fees are ultimately paid by the employer. If you’re worried about having a bill for the time spent negotiating speak to us about a no-win-no-fee arrangement where you don’t pay anything if the negotiation is unsuccessful. Sometimes there are better ways of funding your case the solicitor will discuss with you.


IMPORTANT: The contents of this page are general guidance only and should not therefore be regarded as constituting legal or other advice.