SETTLEMENT AGREEMENTS

Settlement agreements:
Settlement Agreements are simply a contract designed to bring employment to an end without any problems. Once signed you cannot take any claims to an Employment Tribunal. The events need to be recent. Most tribunal claims require starting the ACAS process within 3 months.

If you have been offered a Settlement Agreement by your employer, you will need to take advice from an experienced Employment Law Solicitor.  Before speaking to us, it would be helpful for you to think about:

  • What kind of claims do you have? Unfair dismissal, discrimination and whistle blowing (reporting legal issues followed by detrimental treatment or dismissal)
  • What are the key facts? To have a good case you will need to start with:
    • What happened?
    • When it happened?
    • Are there any documents or witness? Can you prove what happened?

 

What are the different types of Settlement Agreement Payments?

  • Payments in lieu of notice (PILON): Payments in lieu of notice have been subject to changes of treatment recently and are subject to tax and national insurance (whether contractual or not).
  • Outplacement services: Contributions to outplacement services are not taxable and do not count towards the £30000 exemption. These payments are likely to be made direct to the outplacement provider.
  • Salary and benefits: Payments made up to the end of the contract of employment are subject to income tax and national insurance as they are part of normal earnings.
  • Redundancy: Both contractual redundancy payments and statutory payments fall within the £30000 exemption.
  • Holiday pay: Any holiday pay is taxable as usual.
  • Payment on account of a disability: When a payment is on account of a disability, injury or death the payment is tax-free.
  • Injury to feelings: Termination payments for injury to feelings attract income tax unless the injury arises from unlawful discrimination Compensatory and ex-gratia payments: Non- contractual payments made for loss of employment are exempt from tax on the first £30000.
  • Pension contributions: Payments made direct into pension schemes are separate from the £30000 exemption and they are not normally subject to tax though there are limits to the annual and lifetime allowances for contributions.
  • Legal costs: Payment of legal costs by an employer, direct to an employee’s solicitor, in respect of a Settlement Agreement is not usually subject to tax if it is solely in connection with the termination of employment.

What happens if an agreement cannot be reached?

Settlement Agreements are normally preferable to employment tribunals but sometimes it is not appropriate to sign especially when you may have suffered serious financial loss and the amount on offer may not reflect this. In this case things to think are:

  • How strong is your case?
  • Do you have specific details supported by evidence and witnesses?
  • Are the events recent?
  • How long will it take you to find another job?

Our employee legal services offer settlement agreement solicitors, who provide their expertise to ensure the best agreement outcome. We can support you through the terms of your settlement with a hassle-free and independent service.