Employees – don’t sign your Settlement Agreement until you have checked this out !
If you’ve had a protected conversation or a without prejudice discussion with your employer, don’t be too hasty to agree to a deal in the heat of the moment, even if you are desperate to leave.
Speak to Horizon Solicitors to avoid these 5 costly mistakes.
Can you negotiate a Settlement Agreement?
Yes of course you can, but to be binding it must be signed by a solicitor. So why negotiate a deal on your own, when you have to consult an expert anyway – an expert that your employer will pay for ? You are far better off confirming you will need to seek legal advice before you can commit to a deal.
Some people may be up for a change, and happy to leave their employer under the terms of a Settlement Agreement to bring their employment to an end. For others, a “without prejudice” conversation, or a “protected” conversation, may have recently happened unexpectedly and out of the blue, leaving you in disbelief, angry and upset, facing an uncertain future and worried about what to do next.
That clearly is not a good frame of mind in which to negotiate the best deal possible, wrapping up all of your entitlements, so don’t !
So what is a Settlement Agreement?
A Settlement Agreement is a legally binding agreement, most often bringing your employment to an end, on a set of agreed contractual terms representing a clean break between you. You will have no future right to bring any employment claims against your employer, which are “waived” by the Agreement, which means the Agreement must cover everything you are entitled to, now and in the future.
In return for this, your employer will be agreeing to pay you various payments usually including notice pay and compensation, plus non-monetary benefits such as an agreed reference. It is therefore vitally important that you are happy with the agreement, and that the value is fair and reasonable reflecting your personal situation and any rights that may have been infringed and contractual compensation you are entitled to, and that if you ripped it up and sued them, you wouldn’t get loads more !
Once you sign the Settlement Agreement, there is no going back for more…. So get in touch with Horizon Solicitors by clicking the link below, and we will go through your situation and either confirm that the deal offered is reasonable, or we will pick up the reigns and negotiate a better deal. We can work with you remotely, over email, phone and skype, so don’t worry where in the country you are based ! You have nothing to lose as your employer will pay our fees. So we will help you avoid these 5 costly mistakes.
1. Take your time
If you are called into a without prejudice meeting, or a protected conversation, chances are you may not have received much notice. Often employers will say that “things are not working out” and offer you a deal to leave. This is clearly going to provoke a reaction and you will find yourself in a mix of emotions, and you may struggle to fully digest and consider what’s on the table.
So faced with this situation, do not commit to anything and tell them you will need to take independent legal advice and your solicitor will be in touch. At this time of the year, employers like to rush deals through, because know we all could do with a little extra cash boost for Christmas. However, the ACAS Code of Practice on Settlement Agreements recommends it is best practice for employers to allow employees 10 calendar days to obtain legal advice on the Settlement Agreement. Once we are on board, we can control the timetable.
Sometimes employers will send you home on special paid leave. Often employers play the “gardening leave” card, but you cannot be on gardening leave unless they have served notice of dismissal on you. That is unlikely at this stage whilst a deal is on the table. However, we will help play through all of the scenarios with you, for example, what is likely to happen if you refuse to sign…. because of course, it is your choice at the end of the day. We will advise you on the best tactical steps you can take whichever route you choose, to preserve your rights, and protect yourself moving forwards.
2. Properly understanding your claims and how much they are worth?
This is where you need some specialist advice, because you need to know what your claims are realistically worth. For example, is the severance based on a redundancy calculation and does it take into account any contractual entitlement to any enhancements ? Is your employer attempting to cut corners in carrying out a fair consultation process, which could either be individual or collective ? How long would it take for your employer to carry out a fair process – this could be added on to your notice pay to negotiate a bigger package if you are prepared to leave now ? If this is a dismissal, how long is it likely to take you to find suitable alternative employment ? Are there a number of individuals affected and is your employer attempting to circumvent your collective rights ? Have you been subjected to any kind of discriminatory treatment, either before this process kicked off, or is your selection in itself discriminatory? Have you been subjected to any form of bullying or harassment? All of these elements add the potential to negotiate additional amounts, for you to give up your rights to bring an Employment Tribunal claim.
Horizon Solicitors would listen to your situation and calculate your lawful entitlements and calculate any potential compensation and then balance this against the litigation risk and strength of your claim, so that you can make an informed decision about whether to accept the deal offered in the Settlement Agreement. It is often possible to negotiate a payment in addition to notice to offset the salary and benefits you would have earned whilst your employer completed a reasonable redundancy, consultation, disciplinary or other similar procedure.
Finally, we must ensure that you are compensated for all of your benefits e.g. holidays, healthcare, company car, pension, share options and that any future or accrued benefits, such as a bonus, are also included in the calculations, or terms are incorporated to ensure you are paid what you are entitled to at the appropriate time.
3. Avoiding the PILON Tax Trap
The first £30,000 of your redundancy payment is tax free. It used to be the case that if your contract of employment did not have a pay in lieu of notice (PILON) clause, then any PILON payments could also be added to your redundancy payment and tax free up to the £30,000 limit.
The law on this has now changed, so that all PILON payments, regardless of what your contract of employment says, are now taxable. Don’t let your employer fool you into believing that this is tax free, as in most Settlement Agreements, you will agree to pay any tax that is due. This could substantially reduce the amount of compensation you eventually end up with in your pocket.
4. Forgetting all of your non-financial requirements
The Settlement Agreement is a clean break contract so everything about you leaving your employer and finding your next position needs to be covered off to give you the best prospects of moving on quickly. The main items to negotiate could include the following:-
• An agreed announcement to colleagues and potentially customers about your leaving to bring clarity and send a message on your terms, to avoid any rumours or suggestions of any wrongdoing on your part
• An agreed reference
• Relaxation or removal of any post-termination restrictive covenants that could inhibit your next move
Some of these items could be delicate, particularly if you work in a highly competitive industry. It may be that your employer will seek to offset some compensation in order to agree to your terms, so we would conduct a cost-benefit analysis with you and prioritise the elements in your wish list to determine the best negotiating position.
5. Not using an Employment Law Specialist
A Settlement Agreement must be signed by a Solicitor to be valid and binding. Many solicitors offer this service, but to properly evaluate your claim and support you with the best tactical steps to achieve the best outcome, takes expert employment law experience and practice. Horizon Solicitors have over 20 years of experience in pure employment law and have advised on hundreds of agreements from both sides of the fence. We will help you to achieve the best outcome and take you to a new Horizon!