When an employment relationship is coming to an end, an exit package negotiation may take place. This typically occurs when there is a redundancy situation or the likelihood of legal action. 

Below, we examine what an exit package is and address some of the common associated questions. If you still have any queries about exit packages after reading this comprehensive guide, contact us today. Settlement Agreement Lawyers are experts in the sector, so we can analyse your case and advise you on how to proceed.

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What is an Exit Package?

An exit package is a negotiated agreement between an employee and their employer when the employment relationship ceases. Typically, it involves the employer offering financial compensation and additional benefits in exchange for the employee’s departure. In many cases, the agreement will stipulate that the employee won’t pursue legal claims against the employer.

An exit package negotiation could arise if there is a dispute, redundancy, or a chance for legal proceedings to commence. Once an arrangement has been negotiated, it will be formalised through a settlement agreement. 

What Should an Exit Package for Employees Include?

An exit package for employees should include legal entitlements like salary, unused holiday pay and payment in lieu of notice. However, it will more than likely also comprise benefits above basic entitlements. Among other things, this could include:

• Redundancy Pay – In cases of redundancy, statutory redundancy pay is obligatory. That said, enhanced redundancy pay could form part of the settlement.
• Compensation – A financial sum may be granted to compensate employees for waiving their right to claims against their employer. Such claims could include unfair dismissal or discrimination, and the amount offered will often reflect the strength of any potential legal action pursuable.
• Non-Monetary Benefits – Besides receiving a financial figure, employees could negotiate for non-financial benefits. Continued access to medical care, favourable references, and garden leave during the notice period could all form part of the agreement.
• ​​Pension and Shares – Sometimes, employees are entitled to pension contributions and share options they may have accrued. This would normally be addressed during the exit package negotiation.

What Should an Exit Package for Executives Include?

Although similar to that for other employees, an exit package for executives will generally be more comprehensive. An executive’s seniority within an organisation would typically influence the agreement. Key factors that would be considered include:

• Enhanced Financial Compensation – With bigger wages, executives are typically offered significantly higher compensatory packages comprising elements like bonuses.
• Longer Notice Periods – In addition to a larger salary, executives are often entitled to longer notice periods. Consequently, their agreement may comprise a figure for the salary, bonuses, and benefits they would’ve received during this period.
• Protection of Insider Information – Since executives are usually privy to confidential business information, their package may include a non-compete clause or confidentiality agreement. This would prevent them from sharing insider knowledge with competitors, and further compensation may be provided as consideration.
• Stocks and Share Options – These are even more relevant to executives than other employees. Many executives have company shares or stocks, making them a significant topic in the exit package negotiation. Executives will likely push to be treated as a “good leaver” to maintain these benefits.
• Reputation Management – Maintaining a good reputation is essential for career development. Therefore, terms around agreed references and non-disparagement clauses are crucial to protecting one’s professional reputation. This is especially true for high-profile executives, whose exit will likely be publicly announced.

Exit Package Negotiation: Tips and Best Practice

While it can be complex to negotiate an exit package, several steps can be taken to help maximise the outcome. Before negotiations take place, it’s essential that employees understand what they’re entitled to under their contract and UK employment law. Their employee rights could include salary, notice pay, holiday pay, and redundancy pay entitlements.

Once employees understand their rights, they should assess the strength of any potential claims. Making their employer aware of their legal position in a without-prejudice conversation could encourage the employer to offer a more favourable settlement to avoid the risk of tribunal proceedings.

If employers don’t budge on specific elements during the exit package negotiation, employees should consider how else the agreement can be improved. For example, if the compensation payment has reached a limit, non-financial terms, like garden leave, favourable references or the continuation of benefits, could be enhanced.

Employees may consider instructing an employment lawyer to ensure fair treatment and the best possible outcome. A solicitor can help formalise potential claims and use them as leverage when attempting to negotiate an exit package.

Will your Employer Want to Get Involved in Exit Package Negotiation?

Employers will generally consider an exit package negotiation when there’s a risk of legal action. A settlement agreement can provide a swift, less costly dispute resolution measure if a formal grievance has been raised or the prospect of legal proceedings is clear. Similarly, employers may proactively offer an exit package when they want to restructure their company.

That said, employers are under no legal obligation to offer one unless the employment situation concerns statutory redundancy. The likelihood of an employer engaging in negotiations increases if the employee has legal leverage, such as a potential tribunal claim.

How to Get the Best Exit Package with Settlement Agreement Lawyers

Engaging an employment solicitor can be highly beneficial during an exit package negotiation. They will assess an employee’s specific circumstances, ensuring they fully understand their entitlements, from statutory rights to any potential legal claims. They can also advise on the likely value of any claims being waived to ensure this is reflected in the compensation.

In addition to their legal expertise, employment solicitors have extensive experience negotiating with employers to secure favourable terms. This can result in a higher financial settlement or better non-monetary terms, such as enhanced references or extended benefits.

In the UK, it’s also a legal requirement to obtain independent legal advice before signing a settlement agreement. Employment solicitors not only help secure the best possible outcome but also ensure this legal requirement is met.

For expert legal advice on your exit package, contact Settlement Agreement Lawyers. As specialists in employment law with years of experience, we can guide you through the negotiation process and help secure the best possible terms for your departure.

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• Phone 0800 464 7254
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