Introduction – How To Negotiate A Settlement Agreement
Receiving a settlement agreement from your employer can be stressful and usually means you may soon be unemployed.
However, below we cover how you can make the most of a difficult situation and seek to improve the terms on offer. The first offer from an employer is rarely their best, which is why it is important to understand how to negotiate a settlement agreement.
It makes sense to aim for the best deal possible, particularly as you may soon be unemployed. Further, if you get a new job quickly (earning at the same level), you may end up better off financially.
We are specialists in dealing with Settlement Agreements and negotiating better terms and more money. If you have a Settlement Agreement, we will talk you through the process, answer your questions, and if you have the appetite for it, let us do what we do best, which is to get you a better offer (if we negotiate on your behalf, we do this at no risk to you).“I can honestly give Toner Legal a 5 star review and would highly recommend to anyone who has any employment issues. I wasn’t even sure I had a case and the advice and reassurance I was given was amazing. Blair is an amazing lawyer and will give you honest and informative advice. I ended up with a settlement better than I could’ve ever thought possible and keep the number saved incase there is anything I ever need legal advice and representation with in the future.”
How To Negotiate A Settlement Agreement – KEY POINTS
We cover this in more detail below, but our “Top Tips”, on how to negotiate a settlement agreement, are:
- Don’t accept the first offer.
- Stay employed.
- Find a lawyer that specialises in Settlement Agreements and Negotiations.
However, before speaking with your Settlement Agreement specialist, we suggest you:
- Assess the deal (check the figures and understand if any entitlements are missing).
- Think about if you are happy with the offer, and if not, what do you want.
- Get a copy of the settlement agreement, your employment contract, and recent payslips (so they can be easily shared).
- Know your notice period, accrued but untaken holiday and your net monthly pay (the amount you receive, after tax, each month) and details of any other remuneration/benefits.
How Long do I have to Respond?
Your employer may present you with a settlement agreement (often out of the blue) and give you a short deadline to accept it.
A common tactic from employers is to offer a settlement agreement, with a short deadline and sum of money, and suggest that if it is not agreed, some other process will start such as a disciplinary or performance improvement plan.
In this scenario, taking the settlement agreement will seem much easier and less stressful, but this is by design.
The Acas Code of Practice on Employment Settlement Agreements recommends that employees are given at least 10 days to consider a settlement agreement.
When first given the settlement agreement, we suggest that:
- You “keep your powder dry,” meaning you listen to the offer, politely ask for time to consider the proposal, but be clear not to accept it, and mentally prepare yourself for what is to come.
- The same day you receive the settlement agreement, you look for a Settlement Agreement Specialist but don’t call them just yet, consider the next point first.
- It is important to stay calm, to not accept the offer, and to remain employed.
How can I prepare for a negotiation?
How to negotiate a settlement agreement is influenced by preparation.
Knowing that you have more time to respond to the settlement agreement, it is best to use that time wisely.
If your employer is applying pressure for a response, you can reference the Acas Guidance that suggests you are given 10 days or this is something your lawyer can do on your behalf.
Please note, a settlement agreement is only binding if you receive independent advice on its terms and effect from a lawyer, so you need to instruct someone anyway. Further, the cost of this is usually covered by your employer.
Where your employer will not pay for a lawyer to negotiate against it, many lawyers will negotiate on your behalf with no risk to you, meaning if they do not obtain you more money, there is nothing to pay.
Before calling your settlement agreement specialist:
- Think about what you have been offered.
- Are you happy with the offer or not.
- Either way, why not.
- If not, think about what you want and why.
- Think about, realistically, how long it will take you to replace the salary you may be about to lose.
- Know your gross and net monthly income, if it varies, calculate your average.
- Think about the sum of money you want, and have a range in mind, so to include the lowest you would accept.
- Know your notice period, untaken holiday, and anything else you are owed (expenses, commissions, bonus, etc).
- Think about other terms/benefits that are important to you and are in play (such as a reference, private health, shares, expenses, commission, training costs, etc).
Knowing what you want to achieve is important. It is difficult to negotiate without a target in mind. This will also make the initial call with your settlement agreement specialist more productive, and they can comment on whether what you are seeking is realistic.
Equally, knowing your net monthly income (the amount you receive, after tax, each month) is important. This can help you figure out how many months (in terms of net pay) you have/need to find alternative employment.
Why are you receiving a Settlement Agreement?
Consider why this is happening. Do you have any evidence? Please note, a common mistake we see is people panicking and taking confidential company information, such as by sending emails from their work email to their personal email so they have a record. This may be a breach of an internal policy/warrant a disciplinary sanction.
For example, receiving a settlement agreement because of a genuine redundancy situation is not the same as receiving a settlement agreement 1-week after making a complaint about your manager because of inappropriate conduct.
Being clear (even if it is just a suspicion) on why you are receiving the settlement agreement may be useful in any negotiation. Equally, if the employer has genuine concerns about you/your performance, it is important to acknowledge that, especially when deciding if the offer received is fair or not.
Being given a settlement agreement can often be stressful and frankly upsetting. Your hard work and dedication may have gone unnoticed and to be given a settlement agreement that asks you to leave for what seems like a paltry sum of money may make you want to resign and move on.
However, we suggest you stay employed, get prepared, and contact a Settlement Agreement Specialist:
- If you resign, you will lose the majority of your leverage in the negotiation. This is particularly so for employees with more than 2 years of service.
- You may be playing into your employer’s hands and giving them what they want.
- You will lose the opportunity to negotiate.
- You may even lose the offer already made via the Settlement Agreement, meaning you will leave with no additional payments.
Please heed these key points, don’t accept the first offer, stay employed, and contact a settlement agreement specialist.
Who are you negotiating with?
How to negotiate a settlement agreement may vary depending on the person you are negotiating with.
We are referring to the individual that you are dealing with on the other side.
There may only be one option in a small company, but if not, and you have a choice, select the person who is likely to be more sympathetic to your cause and will engage to get an agreement over the line.
How to Make a Counter Offer
The next step is to make your counteroffer.
We suggest this is done in writing, either via a letter or email.
We often send a “without prejudice” letter and then default to email. The without prejudice rule means that if a statement (oral or in writing) is made in a genuine attempt to settle an existing dispute, it cannot then be used as evidence in a court or tribunal (the idea is to give potential parties to litigation an opportunity to settle out of court).
Some key points when making a counteroffer are:
- Apply rationale to what you are asking for. The offer needs to be “pegged” to something, otherwise, it will appear you are just plucking it out of thin air.
- Be sensible. The biggest mistake we see is people asking for too much which prejudices the negotiation because the other side does not see the sense in negotiating. You want to bring the other side to the table and not to run for the hills.
- Don’t shortchange yourself. Equally, you do not want to ask for too little, the opening offer needs to be pitched correctly, which varies depending on the situation. This is where a Settlement Agreement Specialist will really help you.
- Consider non-financial matters and address them (for example, a reference and any restrictive covenants in your contract).
- Consider the termination date (the date the employment is to end) and if you are to work your notice or not.
- Don’t be scared to ask questions. If there are points you do not understand, ask for clarification. Getting more perspective can help progress the negotiation.
Working toward a Final Settlement Agreement
After making your counteroffer, it is best to wait for a response, and progress from there.
The main battleground is virtually always the finances (the amount of money the employer is going to pay).
There are many tactics to deploy that serve to improve the offer an employer makes, but how and when to use them is fact-specific.
If you get an agreement on the finances, the heavy lifting is done, and you can then focus on the other parameters of the negotiation, which will include the terms of the settlement agreement.
When an agreement is reached, the final terms will be recorded in the settlement agreement.
If you have more questions about a settlement agreement then please get in touch with us.
This blog is for information purposes only. Nothing should be relied upon as a substitute for legal advice and nothing written should be construed as legal advice or perceived as creating a lawyer-client relationship.