When you are in the midst of settlement agreement negotiations, one of your main considerations will be whether the financial package makes it worth signing or not.

awaiting interview

Several factors will come into play here. Usually these will be to do with the strength of your bargaining position, as the employee.

A good way of looking at this is to ask the following questions:

  • How easy would it be for my employer to dismiss me fairly in any case?
  • How long would the dismissal process take?
  • How much is the risk and hassle of not settling worth to the employer?

Everything will turn on the circumstances of the proposed settlement agreement.

How strong is your bargaining position?

In redundancy cases, it is worth ascertaining whether your position is going to be replaced in whole or in part. If not, it will probably be hard to argue against a genuine redundancy situation. Compensation will also potentially be limited to the amount of time it takes to run a fair consultation process, plus the statutory redundancy amount.

However, you may have been chosen for redundancy from a group of people – some of whom are being made redundant and some of whom are not. In these cases, it may be possible to challenge your selection, particularly if your experience is better than those remaining, or you believe you were chosen because of discrimination or victimisation.

The ‘value’ of unfair dismissal

proper redundancy process also needs to be followed. If it has not, you will be in a stronger bargaining position during settlement agreement negotiations.

Another important aspect is whether there are vacancies in the business you could fill. If your employer refuses to allow you one of these roles, it could give rise to an unfair dismissal. This would put you in a strong negotiating position.

If you are being made redundant, and both the decision and process have been fair, you may find yourself in a relatively weak bargaining position. However, this does not prevent you from seeking the correct payments.

Note that you usually need two years’ service to be able to bring an unfair dismissal claim in the employment tribunal. However, there are exceptions to this rule. Do not presume it applies to you.

person made redundant

Settlements occurring outside of redundancies

Another potential scenario is that the settlement agreement has been offered as part of a disciplinary procedure against you, or some sort of performance improvement process. Employees in these situations will need to look objectively at the likelihood of a fair dismissal. The stronger the possibility of a fair dismissal, the lower the claim should be settled for. It can be advantageous to leave early, before proceedings begin, to improve the chances of a decent reference.

Conducting the settlement agreement negotiations

In terms of the negotiation itself, it will be important for the employee to make the strength of their legal position clear, i.e. to point out why they would argue that a fair dismissal could not be achieved. The amount of money in the settlement agreement should be looked at from the point of view of a possible employment tribunal award.

It is important to make the employer feel as exposed to legal risk as possible. The ‘feeling’ of exposure to legal risk is quite different from legal risk itself. This is where the involvement of an experienced employment lawyer will put you at an advantage.

It is usually a good idea for employees to remain resolute. Remember: impression is everything. The employer will often be just as keen to settle as the employee. However, the employee ultimately does not have to agree and sign. How confrontational you become is an important judgement call; this approach is not always advisable but may reap financial rewards.

You can find useful guidance on deciding settlement amounts in our Knowledge base.

negotiating settlement agreement

Choosing an employment law expert

Representation by a solicitor is always a good idea and usually a worthwhile investment. Indeed, a solicitor will mostly have to be involved when signing the settlement agreement off.

Employers will usually pay for solicitors to advise on the terms and effects of the settlement agreement, but no more. The cost of this is around £500 plus VAT.

Unfortunately, employers will usually only include an allowance for solicitors which just covers running through the agreement with you and signing it off. If you would like the solicitor to be involved in any negotiations, this will usually cost more. Your solicitor should request a higher contribution from your employer if the circumstances above apply.

Need assistance with a settlement negotiation or the agreement process? Our experienced employment law team is ready to help. Find out more about our no-cost (to you) settlement agreement service.

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