Yes. In most cases, a settlement agreement is negotiable. Employers frequently expect employees to negotiate the financial package and other key terms before signing. Depending on your circumstances, you may be able to negotiate a higher compensation payment, an improved employment reference, changes to restrictive covenants, enhanced legal fee contributions and other contractual terms. The strength of your negotiating position will depend on factors such as your length of service, the reason for your departure and whether you may have potential legal claims against your employer.
A settlement agreement is a legally binding contract between an employer and an employee. In return for receiving compensation and agreed contractual benefits, the employee agrees not to pursue certain legal claims arising from their employment or its termination.
Many employees mistakenly believe that the first settlement offer is fixed and cannot be changed. In reality, employers often begin negotiations with an opening offer that leaves room for discussion.
Settlement agreements are designed to be negotiated. Employers frequently wish to achieve a swift, confidential and amicable conclusion to the employment relationship, and many are prepared to improve their initial offer where appropriate.
Every settlement agreement is different, but the following terms are commonly negotiated.
The amount of compensation is usually the first issue employees consider. Depending on the circumstances, it may be possible to negotiate:
The value of any negotiation will often reflect the legal and commercial risks faced by the employer.
Future employment opportunities can be just as valuable as financial compensation.
Many settlement agreements include an agreed reference which is attached to the agreement itself. Negotiating the wording of this reference provides certainty for both parties and can prevent future disputes.
A carefully drafted reference should accurately reflect your contribution and help support your future career.
If your contract contains restrictions preventing you from joining a competitor, approaching former clients or recruiting colleagues, these provisions may also be negotiable.
Depending on the circumstances, your employer may agree to:
Employers usually make a contribution towards the cost of obtaining the independent legal advice required for a settlement agreement to be valid.
Where negotiations become more complex, it may be appropriate to ask your employer to increase this contribution to reflect the additional legal work involved.
Most settlement agreements contain confidentiality provisions.
These clauses can often be refined to ensure they remain reasonable whilst protecting both parties. It may also be appropriate to include specific exceptions allowing discussions with close family members, professional advisers or regulatory bodies where legally permitted.
No two cases are identical. A number of factors influence how much an employer may be prepared to offer.
If you have potential legal claims — for example:
your negotiating position may be significantly stronger.
Employers often wish to avoid the cost, uncertainty and management time associated with Employment Tribunal proceedings.
Employees with longer service often have greater statutory rights and may have stronger potential claims.
This does not automatically result in a higher settlement payment, but it is one of several factors that may influence negotiations.
Senior executives and directors frequently negotiate wider issues including:
Sometimes an employer simply wishes to conclude matters quickly and confidentially.
Where maintaining confidentiality is particularly important, employers may be more willing to negotiate improved terms.
Not necessarily.
The first offer is often intended to begin discussions rather than conclude them.
Before accepting any settlement agreement, you should understand:
A specialist settlement agreement solicitor can advise whether the offer appears reasonable in the circumstances and identify opportunities for improvement.
Employees sometimes reduce their negotiating position by:
Taking independent legal advice before responding to an offer can help avoid these mistakes.
Sarah had worked for her employer for nine years when she was invited to a protected conversation and offered a settlement agreement.
Her employer initially offered three months’ salary together with a basic factual employment reference.
Following legal advice, it became apparent that there were concerns regarding the redundancy process and potential procedural issues.
Negotiations resulted in:
The revised settlement package better reflected Sarah’s legal position and future career prospects.
Every case is different, but this example illustrates why obtaining specialist advice before signing can be valuable.
Yes. An employer is not obliged to negotiate and may decide that its original offer is final. However, many employers remain willing to discuss reasonable proposals, particularly where there are identifiable legal or commercial risks.
You can, but settlement agreements must be signed off by an independent legal adviser to become legally binding. A specialist solicitor can also identify issues and negotiating opportunities that may not be immediately obvious.
Not usually. Settlement agreements are commercial negotiations. Provided discussions remain professional and constructive, employers generally expect some negotiation before an agreement is finalised.
Straightforward negotiations may conclude within a few days, while more complex cases involving senior employees or potential Employment Tribunal claims can take longer.
No. Settlement agreements are assessed individually. Appropriate compensation depends on your contractual entitlement, your legal position and the circumstances of your departure.
At Settlement Agreement Expert, I advise employees throughout England and Wales on settlement agreements. We will review your proposed agreement, explain your legal position in plain English and, where appropriate, negotiate improved terms on your behalf.
If you have been offered a settlement agreement and would like independent legal advice, contact us today for a prompt review.
