What Can You Negotiate in a Settlement Agreement Besides the Money

When you receive a settlement agreement, it is natural to focus first on the amount of compensation being offered.

However, the headline payment is only one part of the overall package. The agreement may also affect when your employment ends, whether you need to work your notice period, what your employer says about you, whether you can join a competitor and what information you are allowed to discuss after leaving.

These terms can sometimes be just as important as the money, particularly if you are concerned about finding another job or protecting your professional reputation.

Settlement agreements are voluntary. You do not have to accept the first version your employer gives you, and you can propose changes or make a counteroffer, but be aware that any counter-offer is a rejection of your employer’s offer so may see a swift end to negotiations. Whether your employer agrees will depend on the circumstances, but the initial draft may not be the final position.

Look at the whole settlement package

Before negotiating, seek legal advice to understand your position and the implications of making a counter-offer. You should separate the different types of payment included in the agreement. Some amounts may already be owed under your employment contract or statutory rights, while another payment may be offered specifically in return for settling your employment claims.

• Salary up to your leaving date
• Accrued but unused holiday
• Notice pay or payment in lieu of notice
• Unpaid expenses
• Earned commission or bonus
• Statutory or contractual redundancy pay
• Any additional compensation for settling claims

The distinction matters because salary, holiday pay, bonuses and notice-related payments must be taxed as earnings, while the tax treatment of a genuine termination payment depends on its nature and amount. Your employer remains responsible for operating payroll correctly, but the agreement should describe each component clearly and you will likely have to provide a tax indemnity to your employer.

1. Your leaving date and notice arrangements

Your termination date can affect salary, benefits and when you can start another job. You may wish to negotiate a later date, an earlier release, garden leave, payment in lieu of working notice or permission to begin a new role. The agreement should state clearly what happens to notice pay and benefits.

2. Bonus, commission, shares and benefits

Check whether the draft deals with bonus, commission, shares, long-term incentives, pension contributions and other benefits. Entitlement may depend on the contract or scheme rules, including whether you must remain employed on the payment or vesting date. Any agreed exception or payment should appear in writing.

3. An agreed employment reference

A useful reference may be worth more to your future career than a modest increase in compensation. Employers do not usually have a general duty to provide a reference, although obligations can arise from a written agreement or in regulated sectors. Any reference that is provided must be fair and accurate.

You can ask for agreed wording to be attached to the settlement agreement and for the employer to respond consistently to written and verbal requests. Regulated employers may still have reporting duties that cannot be overridden.

4. The announcement about your departure

You may also be able to agree how your departure is communicated to colleagues, clients and external contacts. For example, an agreed announcement might say that you are leaving by mutual agreement, following a restructure or to pursue another opportunity. The wording must remain accurate, but it can help reduce unnecessary speculation.

You can also ask for a mutual commitment that neither party will make derogatory statements that undermine each other or the agreed explanation.

5. Confidentiality and non-disparagement clauses

Confidentiality clauses will likely apply and cover the agreement, the payment, the dispute or business information. They may be negotiable, and should state who you may speak to, such as close family, legal and tax advisers, medical professionals and public authorities.

A clause cannot validly prevent protected whistleblowing or reporting a crime to the police. Acas also says agreements should make clear that they do not stop reporting discrimination or harassment or obtaining legal and healthcare support.

Some drafts include a non-disparagement clause preventing you from making damaging comments about your employer. You can ask for this obligation to be mutual and, where appropriate, to bind named senior individuals who are likely to speak about your departure.

6. Restrictive covenants and your next job

Your contract may restrict competitor work, client contact, recruitment of colleagues or use of confidential information after leaving. A settlement agreement may preserve, replace or add restrictions, and the negotiation can be a good opportunity to seek to remove, shorten or narrow them. Enforceability is complex and fact-sensitive, so get advice before joining a competitor or contacting former clients and colleagues. ^[7]

7. Your employer’s contribution towards legal fees

To validly waive statutory employment claims, you must receive advice from a relevant independent adviser on the terms and effect of the agreement. Employers commonly contribute to the cost, although they are not legally required to pay your legal fees.

A basic contribution may cover a straightforward review, but more may be needed for negotiation, complex claims, shares or restrictive covenants. You can ask for it to be increased and should check whether it includes VAT.

8. When and how you will be paid

The agreement should state when each payment will be made and any conditions, such as returning equipment, completing a handover or withdrawing a tribunal claim. You may be able to request a fixed or earlier payment date and interest if payment is late.

9. Claims, warranties and exceptions

The agreement lists claims you will not pursue and may include warranties about matters such as another job, misconduct or confidential information. Do not give a warranty unless it is accurate. Appropriate exceptions may include enforcement rights, accrued pension rights, certain personal injury claims and rights arising after signature, but the wording needs legal review.

A general statement that every possible claim is settled is not enough on its own to waive statutory employment claims. The agreement must relate to particular complaints or proceedings, and you must receive independent advice about its effect.

How much negotiating power do you have?

Your ability to improve the terms depends on the employer’s reason and process for seeking an agreed exit and the legal and commercial risks on both sides. Relevant factors may include:

• The strength and value of any potential employment claims
• Problems with a redundancy, disciplinary or performance process
• Evidence of discrimination or whistleblowing
• The value of your contractual entitlements and benefits
• The employer’s need for speed, certainty or confidentiality

Negotiation does not always mean asking only for more compensation. A focused counterproposal addressing the terms that matter most to you may be more effective than challenging every clause.

A practical settlement agreement negotiation checklist

1. Gather your contract, bonus or commission rules and relevant correspondence.
2. Separate money already owed from the additional settlement payment.
3. Identify the terms that matter most, such as compensation, reference wording and restrictions.
4. Record the deadline and get advice before resigning or rejecting the offer.
5. Make sure every agreed change appears in the final written version before signing.

When should you contact employment solicitors?

Seek advice promptly, especially if the deadline is short, the offer follows redundancy or a disciplinary process, or the document affects bonus, shares, reputation or future work. An employment solicitor can identify existing entitlements, assess potential claims and explain which terms are realistic negotiation priorities, as well as explaining the implications and risks of negotiating.

Frequently asked questions

Can I negotiate a settlement agreement after receiving the first draft?

Yes, but there could be risks, as you will be rejecting your employer’s offer. Settlement agreements are voluntary, and either side can make proposals and counterproposals. Your employer does not have to accept your changes, so a reasoned and prioritised response is usually more effective than challenging every term. And, your employer can withdraw the offer at any time until an effective and binding settlement agreement is signed. ^{[1] [2]}

Can an employer refuse to change the reference?

Yes. An agreed reference is negotiated rather than automatic. However, many employers will agree basic and factual wording to provide certainty for both sides. Any reference given must still be fair and accurate, and regulated employers may have additional duties. ^[5]

Can I sign now and negotiate a term later?

No. You should assume the signed agreement records the complete deal. Do not rely on side conversations or promises that are not included in the final document.

Before you sign

A settlement agreement can affect your income, professional reputation, legal rights and ability to work after leaving. Before signing, make sure you understand not only how much you will receive, but everything else you are agreeing to.

Article written by
Sally Eastwood

At Springhouse Solicitors we offer a range of services, so please contact our friendly customer services team to discuss further via  hello@kilgannonlaw.co.uk or  0800 915 7777.

Disclaimer 

The above provides a general overview of areas in employment law and is not intended nor construed as providing specific legal advice.  This article is for information purposes only and is correct at the time of publication. It does not constitute legal advice.

24.06.26