Yes, in many cases you can negotiate a settlement agreement. Although employers often present a settlement agreement as a final offer, it is frequently an opening position. A settlement agreement is a legally binding contract used to settle potential employment-related claims and usually to bring employment to an end on agreed terms. Because the agreement prevents the employee from pursuing claims in the Employment Tribunal or courts, there is often scope for negotiation, particularly where there is potential legal risk for the employer.
What can be negotiated in a settlement agreement?
A settlement agreement can often be negotiated beyond the headline compensation figure. Employees may be able to negotiate a higher ex gratia payment, clarification of notice pay and outstanding contractual entitlements, bonus or commission treatment, and the terms of any agreed reference. Other provisions that may be open to negotiation include confidentiality clauses, post-termination restrictions, non-derogatory statements, and the practical arrangements for departure (such as announcement wording or garden leave). Tax treatment cannot be altered by agreement between the parties, but the drafting can clarify how payments are structured in line with current tax law.
When should you negotiate a settlement agreement?
You should consider negotiating a settlement agreement if the offer does not properly reflect your contractual entitlements, length of service, or the potential value of any legal claims. Situations involving redundancy processes, unfair dismissal risk, discrimination allegations, whistleblowing, or breach of contract may increase the employer’s incentive to reach agreement. However, the strength of any negotiating position depends on the underlying legal merits and the commercial context. It is usually more effective to assess the legal position first and then respond in a structured way, rather than rejecting an offer without analysis.
Why legal advice is important before negotiating
Independent legal advice is a statutory requirement for a settlement agreement to be valid. A qualified adviser (usually a solicitor) must confirm that you understand the effect of the agreement and the claims you are giving up. A solicitor can also assess whether the financial offer is reasonable in light of potential claims, identify legal leverage where it exists, and conduct negotiations where appropriate. Once a settlement agreement is signed, the ability to pursue covered claims is normally waived, so informed advice before signing is essential.
