Settlement Agreement Negotiations: How To Secure The Best Deal 

sarah ryan
Sarah RyanAccount Manager @ Lawhive & Non-Practising Solicitor
Updated on 9th February 2024

Settlement agreement negotiations can feel overwhelming. More often than not, employees navigating settlement agreements are unfamiliar with the process and may not even realise they can negotiate terms.

settlement-agreement-negotiations

Regardless, you must seek independent legal advice to ensure you understand the agreement fully. And, if you believe you can negotiate a better deal, you should!

In this article, we'll offer practical advice to help you in settlement agreement negotiations and achieve the best outcome. 

How to negotiate the best deal on a settlement agreement 

Negotiating is a part of life, but it can be tough for some. When it comes to settling matters with your employer, it might seem intimidating because of the perceived power dynamic.

However, it's important to know that in a settlement agreement, you can negotiate on both the terms and compensation amount. So, feeling confident in your negotiation skills is key, especially if you're not using a professional like a solicitor. Here are some top tips to help you in settlement agreement negotiations. 

Take your time 

One of the most common errors employees make when offered settlement agreements is reacting quickly out of panic, especially if the situation catches them off guard.

Keep in mind, that if your employer offers you a settlement agreement, you don’t have to decide right away. They should give you a reasonable amount of time to consider the offer and make an informed choice, regardless of whether you've dealt with such situations before.

The ACAS Code of Practice on Employment Settlement Agreements suggests that employers should allow employees at least ten days to mull over a settlement offer. So, it's important to understand that you have the luxury of time. Use it wisely to thoroughly examine and grasp the offer, seek legal advice, and craft a thoughtful response.

Know what you need from the agreement 

If you're thinking about negotiating a settlement agreement with your employer, it's important to know exactly what you want from it. Don't be afraid to ask for what you need. Many employees avoid negotiating because they feel unsure or fear rejection.

But here's the thing: the settlement agreement you agree to will have a big impact on your life. So, it's important to figure out what you need from it to make sure it works for you.

Consider:

  • What's most important to you in the settlement agreement?

  • What's the minimum outcome you'd accept?

  • What would be the best-case scenario given your situation?

Negotiating isn't just about money. For example, you might want to include getting a reference to help with future job searches.

Once you understand your needs and how to ask for them, negotiating a settlement agreement becomes much easier.

Have a strategy 

At the start of settlement negotiations, most companies offer only what's legally required. So, if you're serious about negotiating, you need a solid strategy and effective tactics to persuade your employer to accept your counteroffer.

Think about it from your boss's perspective. Asserting your needs is important, but it's better to understand what might sway your employer to agree to better terms.

One effective tactic is suggesting you might reject the offer and go to an Employment Tribunal. Many employers want to avoid legal battles and may offer more to prevent this. This works well in cases like unfair dismissal, where the potential court outcome could be much higher than the initial offer.

However, sometimes a softer approach works better. For example, if you lack legal leverage, highlighting the challenges you'll face post-employment or your contributions to the company can be persuasive. This approach is effective when you have a good relationship with your employer or if they value fairness and morality.

Go off the record 

Off-the-record conversations provide a safe space for both you and your employer to talk openly without worrying about consequences, like what's discussed being used against either party in an Employment Tribunal.

Settlement offers are typically made within protected conversations, similar to the without prejudice rule. But if your employer doesn't suggest a protected conversation, you can request one. This shows that you're seriously considering their offer and are willing to discuss it further to move negotiations forward.

Be realistic 

A settlement agreement should be fair and reasonable, considering factors like your salary, job prospects, how long you've been with the company, your contract terms, and the situation. But it can be hard for you to judge what's fair, especially when emotions are involved.

It's important to be realistic and adjust your expectations accordingly. While it might be tempting to ask for a lot more to make a point, it's usually not the best approach. Instead, when negotiating and making your counteroffer, aim for the highest amount you think is possible based on the facts. Just remember, your employer might counter your offer, so it's smart to position yourself carefully.

Don’t undersell yourself 

Many employees worry about coming across as too demanding when negotiating a settlement agreement, which can lead them to accept terms that aren't fair to them.

While it's important to be realistic and fair, remember that it goes both ways. Asking for what you need isn't selfish, and you should be sure that the terms of the agreement support you properly after your employment ends.

Have confidence in yourself and be clear about what you need. It's okay to ask for what you deserve, and it's not disloyal to stand up for yourself.

Your counteroffer should be reasonable and justified. Take the time to gather evidence to support your case so that you can confidently present your counteroffer and convince your employer to accept it.

Understand how your settlement payment will be taxed 

Settlement payments might be taxed once they go over a certain amount. It's important to know how much tax you might owe on a settlement and factor this into your counteroffer.

Usually, termination payments up to £30,000 are tax-free, including statutory redundancy payments. But other payments, like payment in lieu of notice, holiday pay, and regular wages, are usually taxable.

Understanding taxes is essential during settlement negotiations, even if it's not the most pleasant topic!

Don’t just chase the money 

While money is important, settlement agreements involve more than just the termination payment. As mentioned earlier, you could ask your employer to provide a reference, which costs them nothing but could be valuable for your future job search.

Consider if the agreement or your employment contract has restrictive or post-termination covenants, like non-compete clauses. You might negotiate to have these restrictions lifted to make finding a new job easier.

You can also negotiate other parts of the agreement, such as confidentiality clauses, notice periods, and how your departure will be announced. Don't focus solely on the money. While it's important, of course, there are other aspects worth considering in your negotiations.

Keep your emotions in check 

Disputes with an employer can be intense, but it's essential to stay calm during negotiations. You might feel hurt or angry, but reacting emotionally can make things worse.

If you're not confident negotiating on your own, consider hiring a solicitor. You might need to pay for this if your employer won't cover the solicitor's fees beyond reviewing the settlement agreement. However, having someone support you can be a big help, especially if your case is complex or emotionally challenging. It can ease the pressure and let you focus on your well-being.

We can't stress this enough:

Before agreeing to any settlement agreement, you must get independent legal advice.

An employment law solicitor will help you understand how much compensation you should get, which terms are good for you, the tax implications, and how strong your case is if you were to go to an Employment Tribunal.

With this knowledge, you can confidently enter negotiations, ready to spot a bad settlement agreement and make a strong counteroffer.

At Lawhive, our network of employment lawyers is here to help you quickly through our online platform. And in most cases, your employer pays their fees. So, it's important to seek legal advice as soon as possible in a settlement agreement situation.

For more assistance and advice, book a free case evaluation with our Legal Assessment experts now.

Be open to compromise 

In most cases, opting for a settlement agreement is much better than going to court. While it's cheaper for your employer, it's faster and less stressful for you. But that doesn't mean settlement agreements are always perfect.

When it comes to settling, be open to negotiation and compromise. It's not about winning or losing but finding a solution that works for both sides. It's important not to settle for less than you deserve, but also to be willing to work together with your employer.

Negotiations should be about finding a fair and peaceful resolution that benefits everyone involved.

How to present a counteroffer in settlement agreement negotiations

You can make a counteroffer either by talking to your employer or putting it in writing. It's often a good start to talk openly, but it's important to stay calm.

Here are some tips for making a counteroffer:

  • Start with a fair offer and clearly say what you want without asking for too much.

  • Don't worry about silence; they can help.

  • Listen carefully to your employer's response and take your time before answering.

  • Instead of arguing, ask questions to understand better.

Using these tips, you should feel confident negotiating with your employer and hopefully reaching an agreement.

Once you agree on terms, the employer usually writes up the agreement, but it's good to confirm this in writing. When you get the agreement, read it carefully, and if it's not what you expected, talk to your employer.

Remember, you need to speak to a solicitor before the agreement becomes final. So, get legal advice quickly and ask your solicitor to check the agreement.

Get help from Lawhive

Our skilled network of employment law experts is here to help you get the best settlement agreement possible. With Lawhive, you can quickly get legal advice online from top lawyers no matter where you are.

To start, just book a free case assessment with our Legal Assessment Team. We'll ask you some questions about your situation and then connect you with the right solicitor from our network. Whether you need a review, help with negotiating, or guidance in making a decision, we're here for you.

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