Settlement Agreement negotiations – what you need to know
These are sometimes called Pre –Termination Negotiations
What is a PTN?
PTN (Pre-Termination Negotiation) is a dialogue between employer and employee used to resolve disputes and to encourage a resolution and settlement to exit the business.
What does ‘Without Prejudice’ mean? (To have a ‘Without Prejudice’ Conversation)
This means the above conversation being ‘protected’ between employer and employee and cannot be used as evidence or referred to in any other discussions, formal or informal outside of PTN.
How long does PTN last for?
Up to 10 days , in line with a code of practice on this subject but we can conclude these very quickly , sometimes on the same day
Does the employee have to accept the PTN?
No – it’s up to the employee if they choose to accept the PTN; in the cases of where a PTN is accepted into, to negate the formal process, if the settlement cannot be reached then the employee returns to work and formal process commences.
What is a Settlement Agreement (SA)?
A legally binding agreement between the employer and employee stating the terms agreed between both parties in respect of the employee leaving employment
Am I able to discuss the Settlement Agreement with anyone?
No – The ‘Without Prejudice’ conversation, the discussion within the PTN and Settlement Agreement itself are considered confidential and must not be disclosed to anyone outside of those within the discussion, your legal advisor and your partner. Failure to adhere to this principles through any forms of communication – phone, email, social media etc. will result in the offer being removed by the business. Once signed the Settlement Agreement is a legally binding document that has confidentiality clauses contained within; if this is broken the employer has the right to seek re-payment of any monies paid and/or to withdraw the agreement.
Should I take Legal advice?
Absolutely – In fact a Settlement Agreement cannot be considered finalised unless legal representation has been sought; the legal advisor needs to confirm appropriate advice has been given and that they are a practicing solicitor and suitably qualified to provide such advice. The legal advisor must write and sign to that affect. We deal with these every day !
How much will the legal advice cost?
The employer with pay for the employee’s legal advice up to a fixed sum , usually between £350.00 -£500 plus vat ; this is a standard fee. There is no outlay for the employee as the solicitor will invoice the company directly.
What if I don’t agree to the terms of the Settlement Agreement?
The PTN period of 10 days is in place in order for negotiations to take place, if at the end of this period there is no agreement reached, then the employee returns to the business where formal proceedings may be commenced, depending on the reason for the PTN.
What does Formal Proceeding mean?
Depending on the reason for entering into the PTN will depend on next steps should a settlement not be reached; where a PTN is being used to negate a process such as redundancy, this will mean formal redundancy process will commence on return to business. In this event the commencement of a consultation process will be considered effective from the date of the ‘Without Prejudice’ conversation.
How will I receive the documentation?
You will normally receive a letter outlining the principles discussed along with a Settlement Agreement for you to and your legal advisor to review, via email and post.
Will I have access to my employers systems at this time?
For security reasons it is often standard procedure to disable accounts; these are reinstated should a settlement not be reached and/or individuals prefer to remain in work for a handover period.
Settlement agreements are legal contracts between an employer and an employee (or former employee to terminate the contract of employment. We often see settlement agreements in the following circumstances:
- Performance review
- Disciplinary process
The agreement usually contains provisions for the following:
- Payment in lieu of notice (unless the employer wants you to work your notice);
- A sum equivalent to any accrued, unused holiday
Any payment in lieu of notice and holiday pay with be subject to your usual tax and national insurance deductions.
Depending on the circumstances, sometimes there may be an ex-gratia (one-off) payment. This is often referred to as the termination payment and ideally should be an incentivised sum of money to sign the agreement. This sum is tax free up to £30,000.
Employers tend to favour settlement agreements because they can resolve disputes amicably and quickly but also, the terms of the agreement ensure no claim can be brought in the future by the employee.
Settlement agreements can also be highly cost effective for both the employer and the employee. If a claim is brought in the employment tribunal, legal costs are not recoverable therefore, terminating employment under the terms of a settlement agreement can save time, money and stress.
Yes, it is possible to approach your employer on a “without prejudice” (off the record) basis to investigate whether they would be willing to negotiate the terms of your exit from the business. This may be an appropriate course of action if you:
- are unhappy at work;
- have received an unsatisfactory outcome to a grievance and feel unable to continue in the work environment;
- face disciplinary action or performance management;
- believe you may have grounds to bring a claim against your employer in the Employment Tribunal.
Although it may appear that Settlement Agreements only benefit employers, with expert advice from our Settlement Agreement solicitors here in Leeds, you can ensure that all issues between you and your employer are resolved and you receive a fair and appropriate settlement.
The law stipulates that it is a legal requirement for a solicitor (or other accredited advisor, for example a trade union official) to review the terms of a settlement agreement.
A solicitor will review the terms of the agreement and give legal advice on whether the terms are favourable. We do not only consider the financial elements but also whether there are any restrictions which may stop you finding a new job. Also, a solicitor will consider your employment rights including whether there is any discrimination or potential flaws which may give rise to a potential claim.
These agreements are designed to draw an employment contract to a close or to make amendments to a contract in a fair and reasonable way. You should not be prejudiced as a result of the process.
It is normal for the employer to contribute towards the employees legal costs and this is typically between £250 and £500 plus Vat.
Our employment solicitors are acknowledged in Legal 500 and Chambers & Partners as being highly experienced in settlement agreements. Where appropriate we will negotiate the terms of an Agreement on your behalf and ensure that your best interests are fully protected.