How to get the best exit deal

If your employer is laying off staff, you’re not alone. As many as a third of retail businesses plan to shed staff in the coming months, according to a new British Retail Consortium report. And that’s just in one industry. Major companies, from Tesco, Santander, Oddbins, and Npower have already warned of job losses this year, and smaller businesses are expected to make cuts too.

Whether your employer is making large-scale redundancies or whether it’s a handful of roles at risk, it’s likely you’ll be asked to sign a settlement agreement if you do have to exit. Being asked to sign a settlement agreement and losing your job can be a stressful experience. But there are ways to make sure you get the best possible deal. Here’s how to handle the process.

What is a settlement agreement?

A Settlement Agreement is a formal, legally-binding agreement between an employer and an employee. Typically, an employee is given a sum of money in return for not bringing certain legal claims against his or her employer. The Settlement Agreement is a document which sets out the full details of the deal. It’s a final sign-off before you leave work. And they’re used in everything from wide-scale redundancy situations down to individual cases, where an employee may be asked to leave their job. This could be because of an employer thinking that he or she is performing badly in their job; is guilty of misconduct or if an employee has a dispute with the employer, which may result in an employment tribunal claim.

Sometimes, an employer will offer a Settlement Agreement – with a financial incentive – in return for the employee not bringing a claim, and usually (though not always), in return for them leaving their job.

What are the likely terms/clauses in a Settlement Agreement?

Each Settlement Agreement varies, but, typically, the main clauses in the document will include: any claims to be settled (if you have a dispute with your employer, this will be dealt with here); any payments you will receive when you sign the deal (from a redundancy payment to any extra money you get for going quickly) and the tax that’s to be paid, if relevant; a confidentiality clause (also known as a “gagging order”) so that you can’t discuss the terms of the agreement or talk about commercially-sensitive information; and any extra agreements in the deal, for example, if your employer is offering you a reference, as part of the Settlement Agreement.

Protected conversations

If you’re offered a Settlement Agreement, it’s likely you will first be called into a meeting, perhaps by your line manager or a HR manager. The Settlement Agreement process allows employers to have what’s known as a ‘protected conversation’ with an employee/s, allowing them to set out the terms of a Settlement Agreement, and discuss the employee leaving their job. The content of these conversations is supposed to be confidential (hence ‘protected conversation’). However, in some circumstances, if you think you’re being asked to leave your job because you have a potential discrimination claim against the employer, for example, the conversation is not protected, and you can use it as evidence in an employment tribunal.

Generally speaking, though, these conversations are a way for you to find out what the employer wants. Make a note of what’s being said – it’s hard to remember the details later – and don’t be pushed into making a snap decision (as a minimum, an employer should give you 10 calendar days to consider the offer).

Negotiate a better deal

Settlement Agreements are only legally-binding if the employee has received independent legal advice, and a legal adviser, usually an employment solicitor, has signed off the deal. To help make this happen, employers will often offer employees a contribution towards their legal costs (£300 to £500 is fairly standard), and when you find an employment solicitor, this can be your best chance to negotiate a better offer.

An employment solicitor will make sure the agreement gives you the best deal. He or she will be checking your contractual rights, cash payment, relevant bonuses, pension payments, accrued holiday and whether the overall compensatory amount offered is a good deal. If not, your lawyer can help you negotiate your exit package. This may mean the payment can be structured in a more tax-efficient way or the employer may be persuaded to offer you extras, such as: career coaching or funding for further training to help you secure another job. In the case of wide-scale redundancies, it can be trickier to secure an enhanced individual deal.

But if you’ve a family to support, and it’s going to take time to find another job, securing an agreed reference, and extra money, can make all the difference.

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