When you are unhappy at work, this often bleeds into your whole life and can make you miserable. When you are having issues at work, there are various considerations and specific ways to address the problem, but this can often be boiled down to either (1) staying employed and trying to fix the problems or (2) exiting the business (if done properly, with tax free compensation, a reference, your reputation intact). The best option is often dictated by your appetite to stay or leave. However, even if you want to leave, this can be a big decision, and a very scary prospect, as you may heavily rely on the income from the relevant employment. This is why it is important to understand your options and the prospect of tax free payments on termination of employment.
Tax Free Payments On Termination Of Employment
When an employee exits a business, there are settlement agreements – typical payments, to be aware of, but there is also the prospect of obtaining tax free payments on termination on employment. When negotiating exits, we regularly pursue “ex-gratia” payments (aka “termination” or “severance” payments) that can be tax free up to £30,000.
When most people are unhappy at work, they simply look for a new job and leave, often foregoing the significant financial compensation they may have been able to obtain. They have also left themselves exposed as a reference from the previous employer is not guaranteed and there is nothing in place to protect their reputation
Our Approach
We have a different approach and do not want you to simply resign with the only option to get compensation now being a Tribunal claim, which can take several years. What we do is:
- Keep you employed, whilst we negotiate an exit (you have more leverage this way and have not given up your main source of income).
- You only exit the business on your terms (tax free compensation, a reference, your reputation intact).
- You then have financial security to purse your dream role.
We take steps to give you the best chance of a favourable outcome in the shortest amount of time (generally, this is what everyone wants).
How Do I Negotiate An Exit?
Sadly, negotiating your own exit is very difficult. Your employer holds all the cards and you need professional assistance to level the playing field. Negotiating an exit can also be stressful and time consuming, so it makes sense to offload this to a professional. Further, if you play your cards right, you may be able to obtain your full notice pay without having to work your notice, holiday pay, and a tax free payment (as compensation).
Further, when you negotiate an exit, most employments come to an end via a settlement agreement, which is a legally binding contract that records the terms of settlement – it is a unique type of contract that is only binding if the employee obtains independent advice on the terms and effect of the agreement.
FAQs on Negotiating an Exit from Employment
1. What should I do if I’m unhappy at work?
If you’re unhappy at work, you have two main options:
- Stay employed and attempt to resolve the issues.
- Negotiate an exit, ideally with tax-free compensation, a reference, and your reputation intact.
The right choice often depends on your circumstances and willingness to either stay or leave.
2. What are tax-free payments on termination of employment?
Tax-free payments, such as “ex-gratia” or “severance” payments, can be negotiated during your exit. These payments can be tax-free up to £30,000 and are designed to compensate you for loss of office.
3. Why shouldn’t I just resign if I’m unhappy at work?
Resigning without professional guidance may result in:
- Losing out on potential compensation.
- Difficulty securing a reference.
- Risking your professional reputation.
- Taking years at the employment tribunal to get compensation.
A strategic approach allows you to negotiate favourable terms when you have the most leverage.
4. How does professional assistance help with negotiating an exit?
A professional can:
- Give you professional advice to maximise your chances of leaving on the best terms (more money and no barriers in place when looking for a new job).
- Get your full notice pay (without having to work your notice).
- Obtain Tax free compensation.
- Ensure a legally binding settlement agreement is in place to protect your rights.
- This makes the process less stressful and increases your chances of a better outcome.
5. What is a settlement agreement, and why is it important?
A settlement agreement is a legally binding document that records the terms of your exit. It protects you and and is only enforceable if you’ve received independent legal advice on its terms.
6. Can I negotiate my own exit?
While possible, negotiating your own exit is challenging. Employers often hold significant power in these situations, and without expertise, you risk leaving money or benefits on the table. Hiring a professional ensures a fair process and a better outcome. Trying to negotiate alone often results in a worse outcome and you need to engage a lawyer for the settlement agreement in any event.
8. What steps can I take to prepare for an exit negotiation?
- Stay employed, take advice, act quickly.