FAQs - Settlement Agreement Lawyers

Q: What are the circumstances under which I can seek a settlement agreement?

You may wish to seek a settlement agreement in a variety of circumstances, generally either when you want to leave your employment because you are unhappy, because your employer wants to terminate your employment, or where you have already left your employment and want to settle various claims you may have against your employer. The following types of situations are circumstances which could lead to a settlement agreement: If your employer has failed to pay you wages that you are due If your employer has breached your contract of employment in some way (e.g. by failing to pay you a bonus or commission that you believe that you are due) If you have been discriminated against at your job or harassed If you have been victimised by your employer because you have raised a complaint If your employer thinks that you are underperforming If your employer thinks that you may have engaged in misconduct Senior employees in organisations (such as executives or directors) may find that a restructure, merger or a change in strategy may lead to a situation where their continued employment is difficult. A natural solution to such an issue is for the senior employee and the employer to agree mutual termination terms, which can be arranged via an employment settlement agreement.

Q: What should I do if I have been offered a settlement agreement?

If you have been offered a settlement agreement by your employer then you should do the following: Check, in writing, the exact terms of what you're being offered by your employer - make sure that you and your employer are on the same page about what you're being offered; Obtain a copy of the settlement agreement from your employer; Thoroughly check the settlement agreement to ensure that the terms that the offer your employer has made you is drafted into the settlement agreement; Speak to a specialist employment solicitor to discuss your situation and next steps; Consider whether you want to negotiate the agreement or to just proceed to complete it

Q: Will I have to pay tax on the sums I am paid under the settlement agreement?

The short answer is that you will need to pay tax on some of the payments made under a settlement agreement but you will not need to pay tax on certain sums. You will normally need to pay tax on the following sums: Your notice pay (whether you're being paid in lieu for your notice pay, you work your notice out, or you're placed on garden leave); Holiday pay; Bonus payments; and Any other payments that you're contractually owed by your employer You will not normally have to pay tax (or National Insurance contributions) on payments made as compensation for the termination of your employment (also known as 'ex-gratia payments') up to a total sum of £30,000. Any compensation paid over £30,000 will normally be subject to tax (but not National Insurance). Payments made as compensation for injury to feelings are generally also not taxable (if the injury to your feelings relates to a detriment that you suffered prior to your dismissal). Equally, payments made on account of a disability are also normally free of tax and national insurance.

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