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What are the common negotiated terms in settlement agreements?

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Settlement agreements are increasingly being used by employers in dismissal or redundancy situations; after signing a settlement agreement an employee has waived their rights to bring a claim against their employer.  While they are usually standard documents, it is important that the clauses are reviewed to ensure that they best suit their individual needs.   

Our Employment team reviews here the most common terms used in settlement agreements, and what you should do if you are asked to sign one by your employer.

One of the main terms which employees ask for, or ensure are included within the terms of the settlement agreement, is an agreed announcement or reference.  The inclusion of this clause will be of benefit to you as the employee, as you can then review the terms on which your departure will be announced to other members of staff.

The terms of an announcement or a reference would usually be set out clearly in the agreement. This means that your employer will be required not to deviate from the agreed wording, even when giving oral references.

Another term which is commonly negotiated is a clause which outlines the continuation of a benefit after termination of employment.  This is particularly relevant when you are receiving a payment in lieu of your notice period.  You may seek to continue private medical insurance or a company car, which can again be outlined specifically within the terms of the agreement.  You should however be aware that benefits which are not part of the contractual entitlement during your notice period will be taken into account when calculating the tax free element of any compensation payment.  You can find out more about the tax implications of the settlement agreement payment here

You may also wish to negotiate an entitlement to outplacement support in order to help you find alternative employment once you have left the company.  This clause normally details who in particular will provide the support, how long they will provide the support for and up to what cost limit they will provide the support.

If your employer has asked you to sign a settlement agreement, it is a legal requirement that you seek legal advice before signing.  Your employer will normally fund all or part of the fee for attending a meeting with a solicitor, but it will also provide you with the opportunity to understand your rights, the claims that you are waiving and whether the terms included in the settlement agreement are in your best interest.

Our Employment team are experienced in advising on settlement agreements, as well as negotiating terms between you and your employer.  For more information about how our team can offer you expert and practical advice, contact us today on 023 8071 7717 or email employment@warnergoodman.co.uk.