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What to Watch Out for in a Settlement Agreement!

  1. The Amount – is it reasonable or not? We scrutinise the situation and circumstances of your departure and advise if your offer is reasonable and if not how much more you should get. Please read our article ‘how much should I get in a settlement?’


  1. Identity of Employer – ensure that the right employer is listed, this should match the one in your contract of employment and wage slips.


  1. Can the Employer Pay – is the employer in a position to pay the amount being offered, are they struggling financially? You could look at getting a personal guarantor (usually a director) in case the employer is unable to pay.


  1. Signature – the agreement should only be signed by someone who is authorised by the employer, if not, the agreement could be invalid.


  1. Are you being paid for your notice pay and/or holiday that has been accrued but untaken?


  1. Are you being asked to work your notice or to remain on garden leave – note your employment can be terminated within this period without having to pay you as per agreement (for example gross misconduct) – hence may be better to limit these periods so far as possible.


  1. Are you owed any expenses, there is usually a time limit for these to be claimed post termination.


  1. How long do you have to wait until you are paid, is the proposed date too long, typically, expect payment within 14, 21 or latest 28 days.


  1. Does the sum include a statutory redundancy payment if one is owed?


  1. Tax – the employer will require you to foot the bill for tax or NI including interest and penalties due on any sums or benefits made under the agreement including the termination payment. HMRC are now much more interested with the tax treatment, so ensure that the tax treatment and your obligations are reasonable.


  1. Do you have a personal injury claim, note most agreements will cover this, so ensure that it is specifically excluded from settlement.


  1. Your undertakings (promises your making) you won’t be paid if you breach these, are they reasonable and can they be removed or watered down?


  1. Is an agreed reference being provided, if so, are you happy with it, what about an oral reference, will you be allowed to request a personal reference?


  1. Legal fees – is the employer offering a reasonable amount to enable you to take the necessary advice?

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