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Settlement agreement negotiations

Settlement agreement negotiations take many different forms. Here are some examples of how they occur and what is likely to happen as a result.

Redundancy consultations often lead to the offer of a settlement agreement. The employer needs to reduce overheads and probably has a legitimate reason for selecting certain employees to be considered for redundancy. During this process the employer may ask if anyone would consider voluntary redundancy, or upon finalising who may be made redundant may offer a settlement agreement. 

Why do employers offer settlement agreements?

A settlement agreement enables an employer to make a payment to an employee knowing that they can  not (save for very specific circumstances) come back and claim more. This means it gives the employer certainty, and therefore must be worth their while paying more than the basic amount provided for in redundancy law. As a result this often allows for negotiations to take place to agree the figure to settle your compensation for losing your job.

What are settlement agreement negotiations?

They are talks between employee and employer seeking to agree the amount of money, type of reference and restrictions on working. There are occasions when the removal of restrictive covenants is more important than the money itself. An example might be where the employee wishes to set up their own business which might be in breach of their employment contract.

How much should the settlement agreement be when offered in a redundancy situation?

There is a usually a big difference in payment if the settlement is offered on a voluntary basis or at the the end of the redundancy process. If it is voluntary, the figure is often significantly more than you could expect if made redundant. Please see our redundancy calculator to compare the two figures. It may even be possible to negotiate a higher settlement agreement figure, as the reason for offering voluntary redundancy is to ensure the smooth running of the business. Any redundancy consultation causes uncertainty and potentially affects productivity.

However if the settlement agreement is made after the redundancy consultation, the figure offered is usually only a little more than the statutory minimum redundancy amount. In these cases, if is often worth negotiating, as your employer has shown their hand by wanting to have the protection of a settlement agreement, and that must be worth more than just a small amount more than the statutory minimum.

There are also occasions when an employer has done something so serious to potentially breach an employee's contract, and they have a right to bring a claim against them. A negotiated settlement agreement enables both sides to agree a compensation package for the employee losing their job and therefore prevents the cost and uncertainty of an Employment Tribunal.

Likewise an employee may have acted in someway that was so serious that an employer could consider them to have breached their contract and dismiss them as a result. A negotiated settlement agreement in this case would enable an employee to have some payment, and still provides the employer with certainty.

Whatever your situation, it is important to obtain the best legal advice when commencing settlement agreement negotiations. Our team of expert employment lawyers, led by nationally recognised Paul Grindley is here to help you. Call 0113 320 5000 for a free initial no obligation chat. Or email

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