We provide Legal & HR advice to protect and support your business.

Settlement Agreement FAQs

Reference

There is no legal obligation on an employer to provide a reference for an employee.
However, an agreed reference can be included as an “appendix” or “schedule” to the agreement. This is a useful addition to the agreement from an employee’s perspective as you will have certainty about what the company will say about you to future perspective employers.
The reference will have to be agreed and negotiated with your employer. It may be a factual reference which states your name, role and length of service at the company. You may also ask for a “glowing” reference which sets out your role and achievements at the company in more detail. It is worth noting that some employers only allow a factual reference to be included in the agreement in line with company policy.

Ex gratia payment/Termination payment

If a lump sum is payable to you as compensation in the settlement agreement, the wording of the agreement should state whether it is taxable or tax-free.
Usually sums under £30,000 are tax free, but this is dependant on the wording in the settlement agreement. This can be explicitly referred to as tax free or alternatively it may be made clear in a different clause.

Notice pay

Notice pay varies from individual to individual depending on your contractual notice pay entitlement or your statutory entitlement.
The amount of notice pay stated in the settlement agreement will also depend on whether you have worked through your notice period or whether you are receiving payment in lieu of notice (PILON). This latter option is only available where the provision for a PILON is present in your contract of employment.
Notice pay in a settlement agreement is normally subject to tax and national insurance contributions.

Accrued holiday leave

Any holiday leave which you are entitled to should be included as part of your compensation in the settlement agreement. Usually this is calculated to the nearest half a day or full day.
This is subject to tax and national insurance contributions as it is classed as salary.

Garden leave

As part of the settlement agreement you may be placed on garden leave for a short period of time. This will prevent you from obtaining another job until the time period has elapsed, unless this has been agreed in advance of the garden leave.
In this time period, you should still be entitled to the same protection as if you were an employee. There is often a “release of claims” document that must be signed at the end of this time period to waive your employment law rights. This will also have to be signed following independent legal advice.

Post-termination restrictions


Generally, the validity of post-termination restrictions depends upon their construction and whether they are reasonable. This will vary depending on the restriction(s) imposed in your contract of employment.
We can negotiate with your employer to try and waive these post-termination restrictions. Alternatively, you may receive additional compensation for compliance with the restrictions.

Benefits


As part of your contract of employment you may be entitled to numerous benefits such as health insurance or a company car. In some circumstances it is possible to negotiate for these benefits to continue for a short period of time following the settlement agreement. For example, it may be possible to negotiate and extend your health insurance benefit for a period of 3 months following the termination date.

Bonuses

Your entitlement to a bonus as part of your settlement agreement will depend on whether the bonus is contractual or discretionary.
It will also depend on numerous other factors, such as whether your bonus is payable before the termination date in your contract of employment, and whether the company have reasonable exercised their discretion in refusing to pay the bonus.

Share options

Your entitlement to share options will depend on the share policy and whether the shares are currently vested or unvested.
It will also depend on the nature of your exit from the company and whether you are classed as a “good leaver” or “bad leaver” under the share plan. As the labels suggest, a bad leaver may be unable to claim their entitlement to share options. We can review share plans and negotiate your entitlement to share options.

Company property

There can be a clause in the settlement agreement to ensure company property is dealt with as per the company’s wishes. This can include deleting confidential information or returning property such as a company phone, car or laptop. The company will often require evidence that this clause has been complied with.

Confidentiality

This clause is mainly for the employers benefit as they do not want you to discuss the contents of your settlement agreement with anyone in order to protect the reputation of the company. This confidentiality requirement should also be complied with by your employer to protect your interests.
There are usually some exceptions to this which will allow you to discuss your settlement agreement with your independent legal advisor or close family members. These exceptions may also include future employers and other professional advisers.

Reasons for leaving


As the employer is usually tasked with drafting the settlement agreement they may outline your reason for leaving as something you disagree with. For example, it could state poor performance or misconduct.
As part of negotiating a settlement agreement, we can ask for this to be amended as per your wishes. However, this should not impact you tremendously as the agreement is confidential and this clause will be too.

Disclaimer: The above information should not be taken as legal advice. For legal advice on employment law matters please contact a member of our team directly.

Make an enquiry

Contact Kalra Legal Group

Please let us know your name.
Invalid Input
Please let us know your email address.
Please write a subject for your message.
Invalid Input
Please let us know your message.

Call us 0800 8321554

What our clients say

“I am extremely grateful for the support I received from Anita during a very difficult time with a previous employer. It felt I was in a battle, but someone else was fighting that battle for me. Anita had my best interest at heart all the way, I really cannot praise her enough.”

R.B – Director at Software company

“I cannot thank you enough for all your efforts over the last 6 months working with our company to ensure we have taken all the necessary steps to protect our business and treat all our female staff equally.”

A.B - Managing Director of a Software Company

Contact us

KLG
Head Office
Suite 4, Ground Floor
Braywick House West, Windsor Road,
Maidenhead
Berkshire
SL6 1DN 

KLG
4th Floor
86-90 Paul Street
London
EC2A 4NE

Tel: 08008321554
Email: info@klglaw.co.uk

This website uses cookies to improve functionality and performance. By continuing to browse the site you are agreeing to our use of cookies.