WHAT IS A SETTLEMENT AGREEMENT ?
Settlement Agreements are legally binding agreements that set out the terms of a settlement between an employer and an employee (they used to be called compromise agreements).
Settlement Agreements came into force at the end of July 2013 as part of wider changes in employment laws.
The documents are usually given to employees when they are being made redundant or the business is being restructured.
However they are also offered to employees sometimes if an employer thinks he or she is performing badly in their job or where it might be best for both parties for the employment to end amicably.
Settlement Agreements tend to be used when employers are paying more than the statutory minimum entitlement. The benefit to the employer is that the Settlement Agreement gives the certainty of knowing there will be no dispute or claim afterwards.
You receive a sum of money in return for losing your job and employment rights and cannot bring a claim against your employer. The Settlement Agreement is the final clean break before you leave work.
Settlement Agreements vary but usually there are clauses that deal with:-
- The claims to be settled.
- The payment you would have received.
- Tax issues.
- An agreed reference from your employer.
HOW WE CAN HELP
Once you have signed the Settlement Agreement you are bound by it which is why the law insists that you take independent legal advice about the Settlement Agreement. Usually the employer will pay for this or make a significant contribution.
We can check if you are getting a fair deal and whether you may have any grounds for a claim against your employer (like discrimination or unfair dismissal).
HOW MUCH SHOULD YOU GET ?
An average to well negotiated settlement may be around 4 to 6 months salary including notice.
However inevitably it can be more or less as every situation is different.
We have set out below the typical types of payment you can expect to receive.
Salary and Benefits
You should receive your normal salary and benefits up to the termination date.
Some benefits may extend beyond the termination date, typically:-
- You may agree additional health care cover.
- A payment instead of notice.
- Continued use of a company car.
Payment for untaken holidays
If you haven’t had all of your holiday before the end of your employment you should receive a payment for the unused days.
Holiday entitlement accrues on a monthly basis. For example if you leave half way through the holiday year you will have accrued only half your holiday. Deduct from this the holiday you have taken and you are left with the amount of days for which you should be paid when your employment ends.
Statutory redundancy payment
If you are being made redundant you will be entitled to redundancy payment. The amount depends on:-
- Your length of service.
- Your age.
- Your rate of pay.
You can go online to calculate this.
Enhanced Redundancy payment
Some employers offer better redundancy terms.
Your employment contract and staff handbook should tell you whether you are entitled to this.
Payment instead of notice
If your employment is being terminated under a Settlement Agreement you may not have to work your notice period. Instead your employer may make a payment representing the amount you would have earned during your notice period.
This may be referred to as a compensation or termination payment. This represents an additional amount as an incentive for you to sign the Settlement Agreement.
The amount you should receive will vary depending on the circumstances and may be open to negotiation.
Ex-gratia payments are tax free up to £30,000.
Sometimes your employer may want you to stay up until a certain date possibly to ensure there are enough staff to finish a project.
Your employer will usually contribute around £250 plus VAT towards you Settlement Agreement.
It is in the employer’s interest to make sure that you receive legal advice because a settlement agreement is only binding if you have taken legal advice on it.
Often the contribution will cover our fees which means there is no charge to you but if you want us to negotiate a higher settlement than your employer is offering you will probably have to pay us for this.
Can you negotiate how much you get
Sometimes you may be able to improve on the settlement proposal but typically your employer will have taken advice and will be offering either as much as or if not more than you would get by bringing a claim for redundancy or breach of contract/unfair dismissal. We will work this out for you and tell you how your legal rights compare with the package you have been offered.
Why is a Lasting Power of Attorney so Important?
Lasting Powers of Attorney are very important whether you are young or old. It is a fact that we just don’t know what is around the corner and it may be that you find yourself unexpectedly in need of assistance due to an accident or illness.
There are two types of Lasting Power of Attorney:
(i) Property and Financial Affairs
(ii) Health and Welfare Issues
Each document will enable you to authorise someone or a number of people to make decisions on your behalf both when you have capacity (so perhaps you might just need some help to make certain arrangements) and also when you lack mental capacity (in which case your chosen Attorney/s will make the relevant decisions on your behalf).
It is important that you completely trust the person/people you have chosen to act as your Attorney/s. They will have access to all your personal information.
In addition to appointing main Attorneys, you can also choose to appoint replacement Attorneys. This allows you to extend the life of your Lasting Powers of Attorney to take account of a situation where your main Attorney’s may become unable to act on your behalf.
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