Settlement Agreements: Top Ten Tips for Negotiating a Better Exit Package

If you are exiting a business, whether voluntarily or through redundancy or dismissal, your employer may offer you a Settlement Agreement, setting out exit terms. Whilst such agreements are often presented as a “final” document, what many employees do not realise is that it may be possible to renegotiate certain terms to make them more favourable. A well-negotiated Settlement Agreement can provide financial stability, protect your professional reputation and help ensure that a move to a new employer proceeds smoothly.

In this article, we provide our top ten tips for successfully renegotiating a Settlement Agreement.

NOTE: Whilst renegotiating a Settlement Agreement can be an effective way to secure better terms, it is not without risk. Risks can include the withdrawal of an offer completely, a hardening of the employer’s position, damage to your future relationship with your employer and compromising time-limited claims. You should always seek legal advice before attempting to renegotiate the terms of an exit package.

1. Be Clear About Which Terms You Want to Renegotiate and Why

There are several terms in a Settlement Agreement which might be renegotiated. Commonly renegotiated terms include:

• Financial compensation
• The termination date
• Notice periods and pay, including payments in lieu of notice
• The payment of bonuses or commissions
• The vesting of stock options or restricted shares
• Health insurance and other benefits
• Post-termination restrictions
• References
• Legal fee contributions

Be clear exactly what amendments you are seeking and why.

2. Know What Matters Most to You

What is most important to you? Is it higher compensation, a positive reference, a release from a non-compete restriction in your employment contract, the timing of your exit or ongoing healthcare cover? An employer might be more amenable to renegotiating a few terms rather than several, so be clear on your priorities.

3. Understand Why Your Employer Has Offered You an Exit Package

Generally, an employer will offer a settlement package for one of the following reasons:

• It wants to avoid potential legal claims by the employee
• It wants to protect both its internal and external reputation
• It wants a smooth and quick transition
• It values the contribution made by the employee and wants to keep the departure amicable

Understanding your employer’s motivation can help you decide how best to approach the negotiations.

4. Know Your Leverage

Be clear on the factors that might strengthen your bargaining position. These might include:

• Potential legal claims – If you have a potential claim against your employer, for example for constructive unfair dismissal, unfair dismissal or discrimination, this increases the employer’s risk and may make them more amenable to enhanced terms.
• Timing – Use timings to your advantage. If your employer is in a rush to exit you from the business, delays can strengthen your position. If you are nearing a bonus or vesting date, you might have leverage to secure part of it.
• Length of service or strong performance history – If you have been long-serving or a strong performer, your employer may be more willing to offer higher compensation.
• Senior or specialised role – If you hold a senior or specialised position, your exit may carry more risk, giving you more bargaining power.

5. Adequately Prepare for the Renegotiations

Ensure you are adequately prepared before you commence renegotiations. You should:

• Review all relevant documents, including your employment contract, bonus policies and share plans
• Gather evidence, particularly where potential legal issues exist
• Be ready to present a reasoned case, as renegotiation is more likely to succeed if you can justify your requests

6. Decide Who Should Conduct the Renegotiations

A Settlement Agreement will only be legally binding if you have received independent legal advice on its terms. Whilst in some circumstances it may be best for you to carry out the renegotiations yourself, for example if you have a particularly good relationship with your employer, in others it may be preferable for your solicitor to negotiate on your behalf. This is often the case where legal claims may exist or where complex terms are involved.

7. Decide What Form of Communication to Use

Would the renegotiation be best conducted in person, on the telephone or by email? There is no right or wrong answer, but considerations include whether you have legal claims that might best be presented in writing, your relationship with your employer and any timeframe given for finalising the settlement terms.

8. Be Professional and Constructive in Your Approach

A pragmatic and solutions-focused approach will increase the likelihood of productive negotiations. Vague requests or general push-backs are unlikely to secure the desired result.

9. Be Reasonable and Know When to Compromise

Being overreaching can cause an employer to withdraw or harden its position. Employers are more likely to renegotiate when your requests are reasonable.

10. Know When to Walk Away

In some circumstances, for example if you have a strong legal claim against your employer and the offer does not adequately compensate you, it may be better to pursue your legal rights through the Employment Tribunal. Before doing so, however, it is essential that you fully understand the risks. Your solicitor will be able to assess these with you.

Summary

Renegotiating a Settlement Agreement is not only often possible, it is also advisable if the original terms do not adequately protect your position. With clear objectives, the right leverage and approach, and expert legal advice, you should be able to secure an agreement that protects your rights, financial position and future.

How Pinney Talfourd Can Help

At Pinney Talfourd, we regularly:

• Advise on Settlement Agreements
• Negotiate enhanced exit packages and severance terms
• Assist employees with bringing claims in the Employment Tribunal where negotiations have broken down

If you require advice on a Settlement Agreement or are seeking to negotiate or renegotiate an exit package received from your employer, please contact either Charlotte Buck or Alex Pearce.