If your employer has offered you a settlement agreement, you may be wondering whether the terms are negotiable — and how quickly you need to make a decision. The good news is that you do not necessarily have to accept the first offer put in front of you.
Settlement agreements are voluntary, and there can be a process of negotiation before an agreement is reached. This may involve discussing and making counter-proposals about the financial package, your leaving arrangements and other terms of the agreement.
However, it is important not to let a deadline put you under unnecessary pressure. You should have a reasonable opportunity to consider the proposed terms and obtain independent legal advice.
In this article, Stan Burgess-Brown, Solicitor in Employment & Corporate Commercial at Hutchinson Thomas Solicitors, explains what you need to know about negotiating a settlement agreement and how long you should have to consider one.
Can you negotiate a settlement agreement?
Yes. A settlement agreement is voluntary, so you do not have to accept the terms initially proposed by your employer.
Acas guidance specifically recognises that settlement agreement negotiations can involve proposals and counter-proposals before both parties reach an agreement — or decide that an agreement cannot be reached.
This means that receiving a settlement agreement does not necessarily mean that the figure or terms in the first draft are the final offer.
Depending on your circumstances, there may be several aspects of the agreement that can be negotiated.
What can you negotiate in a settlement agreement?
The obvious starting point is usually the financial offer, but there can be much more to consider than the headline compensation figure.
- Compensation: You may be able to negotiate the amount of compensation being offered.
Whether an offer is reasonable will depend on your individual circumstances, including your employment history, the circumstances surrounding the proposed termination and whether you may have potential employment claims.
- Notice arrangements: Your settlement agreement should make clear what happens to your notice period.
Depending on the circumstances, you may work your notice, receive payment in lieu of notice or agree an alternative arrangement.
It is important to understand how notice pay is being treated and whether it is separate from the proposed settlement payment.
- Holiday pay: You should also check what happens to any accrued but untaken holiday.
Holiday pay that you are contractually entitled to receive is a separate consideration from compensation for giving up employment claims. Your agreement should clearly explain what you will receive and when.
- Bonuses and commission: If you are entitled to a bonus, commission or another payment under your employment arrangements, check whether this has been properly addressed.
Depending on the circumstances, it may be possible to negotiate how outstanding or anticipated payments are dealt with as part of the settlement.
- Your reference: An agreed reference can be an important part of a settlement agreement, particularly if you are moving on to another employer.
You may be able to negotiate the wording of the reference and agree what information your former employer will provide to prospective employers.
- The leaving date and announcement: The date on which your employment ends may also be negotiable.
You might want to remain in employment for a period of time, for example to complete a project or ensure a smooth handover. Alternatively, you may prefer to leave sooner.
It can also be useful to agree what will be communicated internally or externally about your departure.
- Confidentiality: Settlement agreements often contain confidentiality provisions, but these are not simply something you should accept without reading carefully.
You should understand exactly what you are being asked to keep confidential and who you can discuss the agreement with.
There may also be circumstances in which information needs to be disclosed, so the wording of any confidentiality clause should be considered carefully.
- Restrictive covenants: Your existing employment contract may contain restrictive covenants affecting what you can do after leaving your employment.
Depending on the circumstances, these may be addressed or renegotiated as part of a settlement agreement.
This can be particularly important if you are moving to a competitor, setting up your own business or working with clients or contacts from your current employer.
- Legal fees: Employers will often offer to contribute towards the employee’s legal fees for obtaining independent advice.
The amount offered may be negotiable, particularly where the agreement is complex or further negotiation is required.
It is worth checking what the proposed contribution covers before instructing a solicitor.
How long do I have to consider a settlement agreement?
You should be given a reasonable amount of time to consider the proposed settlement agreement and obtain independent legal advice.
The Acas Code of Practice recommends that, as a general rule, employees should be given at least 10 calendar days to consider formal written terms and receive independent advice.
This does not mean that every settlement agreement has a fixed 10-day legal deadline. What constitutes a reasonable period can depend on the circumstances.
For example, a more complicated agreement involving a senior employee, substantial financial terms or multiple issues may require more time to consider properly.
If you have been given a very short deadline, that does not necessarily mean you have to sign immediately. You should seek legal advice as soon as possible and explain the deadline you have been given.
What happens if I don’t agree with the offer?
You do not have to accept a settlement agreement. If you believe the proposed terms are not appropriate, you can discuss your concerns with your employer and, where appropriate, make a counter-offer.
There is no guarantee that your employer will agree to your proposed changes. Negotiation is a process, and ultimately either both parties reach an agreement or they do not.
If no agreement is reached, the situation does not necessarily end there. Depending on the circumstances, your employment may continue, or your employer may follow another appropriate process.
This is one reason why it is important to understand your underlying employment rights and potential claims before deciding what you are prepared to accept.
Should I negotiate a settlement agreement myself?
There is no requirement for you to negotiate through a solicitor, but obtaining independent legal advice can help you understand what you are actually negotiating.
A solicitor can review the agreement, explain the legal claims you may be giving up and identify terms that may need clarification or amendment.
They can also help you assess whether the proposed financial settlement appears appropriate in the context of your circumstances and, where appropriate, negotiate with your employer or their solicitors on your behalf.
Remember that independent legal advice is also a requirement for a settlement agreement to be legally valid. The adviser must advise you on the terms and effect of the agreement and its impact on your ability to pursue the relevant claims.
Don’t let a deadline rush your decision
Being given a settlement agreement can be unsettling, particularly if you have been told that you need to make a decision quickly. However, you do not have to accept the first offer simply because it has been put in front of you.
Taking independent legal advice at an early stage can help you understand your position, identify what may be negotiable and make an informed decision about whether the proposed settlement is right for you.
Advice on negotiating settlement agreements
If you have been offered a settlement agreement, Stan Burgess-Brown, Solicitor in Employment & Corporate Commercial at Hutchinson Thomas Solicitors, can advise you on the terms being proposed and help you understand your options.
Stan can review the agreement, explain the legal rights you may be giving up and advise on areas where negotiation may be appropriate. If you have received a settlement agreement and would like advice on your options, contact Stan at Stan.Burgess-Brown@hutchinsonthomas.com or call 01639 645 061