NEGOTIATIONS

(settlements and exit packages)

A guide on negotiating settlements and exit packages from the employment law experts

Marjon Law, specialist employment lawyers is owner-led by Marc Jones, who is ranked and recommended in legal publications as a leading employment law solicitor, with over 20 years of experience practising solely in employment law.

If you would like urgent advice on negotiating an exit package, please contact us as soon as possible.

Why would you want to negotiate an exit package?

This applies to both employers and employees.

From an employer's point of view, an exit package incorporated in a settlement agreement might be preferable:

as an alternative to carrying out a redundancy consultation process
as an alternative to carrying out a disciplinary process
where there are performance issues with the employee
where the employee's face no longer fits.

An employee might want to negotiate an exit package:

as an alternative to raising a grievance
as an alternative to participating in a disciplinary process
as an alternative to participating in a performance improvement process
where they have been treated badly by their employer or work colleague
where they have been absent from work due to unfair treatment
where they have had their duties eroded over time
where there has been a loss of their status
where there has been a loss of trust and confidence with the employer.

Marjon Law can advise both employees and employers on the best exit packages and negotiate on their behalf. We can also prepare and advise on the terms of a settlement agreement, which is a legally binding document between employer and employee that an employee must take independent legal advice on before signing the agreement.

However, there may be situations where the employee and/or the employer want to negotiate the exit package themselves. In this situation, the employee or the employer should:

prepare properly
decide if a protected conversation is necessary
ensure that they have all relevant contractual documentation
work out the minimum and maximum termination payment
decide the benefits required
decided if the employee will work their contractual notice, be placed on garden leave, or receive a payment in lieu of notice
decide if a leaving statement is required
ascertain if a reference can be provided that is greater than a factual one (ie providing dates of employment and job title)
have an idea of the amount of the legal costs for the employee taking legal advice (preferably from Marjon Law) on the terms of signing the settlement agreement
know how far to push to achieve a settlement.

Prepare properly to negotiate the exit package

If an employer or an employee has not negotiated an exit package before or believes that the process could be difficult or unpredictable, then legal advice should be sought at the earliest opportunity (preferably from Marjon Law who have over 20 years of experience negotiating settlements).

Employees and employers should discuss negotiating a settlement with their business partner or domestic partner, as two heads can be better than one if this is a new experience.

Should there be a protected conversation?

Both an employer and an employee can instigate a protected conversation, which is a confidential discussion between employer and employee that cannot be referred to in an employment tribunal claim for unfair dismissal.

Whether a protected conversation is necessary will depend on the background to instigating an exit conversation. The more contentious, the less likely such a conversation will be appropriate.

What are the relevant documents?

The relevant documents will be:

the employee's employment contract or service agreement, together with any written variations in terms and conditions
any separate restrictive covenants and intellectual property agreement
any separate commission or bonus scheme
any share option scheme or restricted share unit scheme
any correspondence/documentation that may have led to negotiating the exit package.

Without the relevant documents, the employer or the employee could be negotiating from an incorrect starting position and agree to terms that may be detrimental to them.

How much compensation?

This is often the crux of most negotiations, which can lead to a stand-off between what the employer is prepared to pay versus what the employee is prepared to accept by way of a termination payment. Therefore, both the employer and the employee should be prepared to compromise if they want the employee's exit to take place under a settlement agreement.

What benefits should be included?

The relevant documents should provide evidence of what the employee is entitled to receive on termination. That said, there is nothing preventing the employer from offering or the employee from requesting non-contractual benefits (eg the employee's work laptop and/or mobile phone).

What notice of termination should be provided?

This will depend on the background to negotiating the exit package:

if the employee has ongoing work to complete, then working their notice may be preferable
if the employee needs to provide a handover, then garden leave may be preferable
if the employee does not have another job to go to, then garden leave may be preferable as it will be easier to get another job if still employed by the employer
if there has been a breakdown in the working relationship between employer and employee then a payment in lieu of notice may be preferable.

Should there be a leaving statement?

Often this is relevant where the employee is in a senior position or manages a team, as without a leaving statement a sudden departure could look suspicious or raise uncomfortable questions. If a leaving statement is required, then the employer and the employee will need to agree on the wording.

What reference can be given?

In this day and age, many employers have a policy of only providing factual references. If that is the case, then an employee may find it hard to obtain a full reference from their employer. If the employer does not have such a policy, then the employee should prepare a draft reference of what the employer has to say about them.

What amount should be included for legal costs?

Unless the employer or the employee has been party to a settlement agreement before, the process will be new, and the terms may on paper look good but after taking legal advice may need to be amended. Therefore, the less confident the employee is about the terms of a settlement agreement the higher the legal costs should be to ensure they take the correct advice from a specialist employment law solicitor (from Marjon Law) and are not left out of pocket.

What are the limits to negotiation?

This is a key element in negotiations: knowing how hard to push and when to stop!

Continuing to push a negotiation when one of the parties has made it clear that they have made a final offer, may lead to a withdrawal of the offer of an exit package and a potential deterioration of the relationship between employer and employee (if it was not previously broken). For example, if an employee starts ACAS early conciliation when negotiations are not progressing might be viewed by the employer as an attempt to increase the leverage in the negotiations and a hostile act.

There are no one-size fits in negotiating an exit package. The parties will have to weigh the benefits and disadvantages of each course of action. There is no substitute for experienced employment law specialists (Marjon Law) when negotiating an exit package.

The material contained in this web page is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.