Can I Negotiate More Money in a Settlement Agreement?

What Can I Negotiate in a Settlement Agreement?

A settlement agreement may contain several financial and non-financial terms that can potentially be negotiated.

These may include:

• An increase in the compensation payment
• Payment in lieu of notice
• Outstanding salary
• Accrued but untaken holiday
• Bonus or commission payments
• Benefits during the notice period
• Pension contributions
• Legal fees
• An agreed reference
• The wording of the announcement to colleagues
• The termination date
• Confidentiality provisions
• Post-termination restrictions

The amount available for negotiation will depend on the circumstances of your employment and the reasons for the proposed settlement.

How Much More Money Can I Ask For?

There is no fixed percentage or amount that an employee is automatically entitled to negotiate.

The appropriate figure will depend on factors such as:

• Your salary and length of service
• The circumstances surrounding the termination
• Whether you may have potential employment claims
• Your notice entitlement
• Your contractual benefits
• Unpaid wages, commission or bonuses
• Unused holiday entitlement
• The strength of your legal position
• The employer’s desire to reach an agreement
• How quickly the employer wants the matter resolved

For example, if you believe you may have a potential claim against your employer, this can sometimes provide a stronger basis for negotiating an increased settlement payment.

However, you should not make exaggerated or unsupported claims simply to increase the settlement figure. A solicitor can help you assess the potential value and strength of any claims before negotiations begin.

Why Would an Employer Pay More?

You may wonder why an employer would agree to increase its offer.

The purpose of a settlement agreement is generally to provide certainty to both sides. The employer may want to avoid the cost, management time, uncertainty and potential risks associated with an employment tribunal claim.

An employer may therefore be willing to increase its offer where doing so provides a practical way of resolving the dispute.

For example, an employer may prefer to pay an additional amount rather than face:

• An employment tribunal claim
• Legal costs
• Management time
• Workplace disruption
• Reputational concerns
• Uncertainty about the outcome of a dispute

This does not mean that every employee can demand a higher payment. Negotiations need to be based on the particular circumstances of the case.

Can a Solicitor Negotiate on My Behalf?

Yes. An employment solicitor can review your settlement agreement, explain your rights and, where appropriate, negotiate with your employer or their solicitors on your behalf.

This can be particularly useful where:

• You believe the offer is too low
• You have concerns about the circumstances of your dismissal
• You may have potential discrimination or unfair dismissal claims
• You have a contractual dispute
• Your bonus or commission has not been included
• You are subject to restrictive covenants
• You want an improved reference
• You want changes to confidentiality or other contractual terms

Your solicitor can help identify areas where there may be room for negotiation and communicate your counterproposal professionally.

What Should I Do If the Settlement Offer Is Too Low?

If you believe the proposed settlement is too low, do not feel pressured to sign immediately.

Instead, consider the following steps:

1. Do Not Sign Straight Away

A settlement agreement is legally binding once properly entered into. You should understand the terms before signing.

2. Get Independent Legal Advice

You must normally receive independent legal advice for a settlement agreement to be legally valid. Your solicitor should explain the agreement and advise you on your rights.

3. Assess Your Potential Claims

Your solicitor can consider whether you may have potential claims against your employer and how strong those claims might be.

4. Calculate What You Are Already Owed

Make sure the offer accounts for amounts such as:

• Salary
• Notice pay
• Holiday pay
• Bonuses
• Commission
• Contractual benefits

These should be distinguished from any additional compensation being offered for settling potential claims.

5. Make a Reasonable Counteroffer

Your solicitor may recommend making a counteroffer based on the circumstances and potential risks for both parties.

6. Negotiate the Other Terms

Negotiation is not always limited to the amount of money. You may also be able to negotiate the termination date, reference, confidentiality wording and other provisions.

Is the Settlement Payment Tax-Free?

Not necessarily.

Some payments made under a settlement agreement may be subject to tax and National Insurance, while certain termination payments can potentially qualify for tax treatment under the relevant rules.

In many circumstances, the first £30,000 of qualifying termination payments can be paid free of income tax, subject to the applicable conditions. However, this does not mean that every payment described as a “settlement payment” is automatically tax-free.

Your solicitor can explain the wording of the agreement, but you may also need specialist tax advice depending on the circumstances.

Can I Negotiate After Receiving the First Offer?

Yes. The first settlement offer can often be treated as the starting point for negotiations rather than the final position.

However, there is no guarantee that your employer will increase the offer.

Your negotiating position may depend on how strong your potential claims are, how much evidence you have, your contractual rights and the employer’s reasons for wanting to settle.

A well-supported counteroffer is generally more persuasive than simply asking for more money without explaining why.

Can I Negotiate the Settlement Agreement Deadline?

You may also be able to ask for additional time to consider the agreement.

You should not feel pressured into signing immediately. The circumstances will determine what is a reasonable period for you to obtain advice and consider the proposed terms.

If you need more time, your solicitor can request an extension from the employer.

What If My Employer Refuses to Increase the Offer?

Your employer does not have to agree to your counteroffer.

If negotiations fail, you may have to decide whether:

1. To accept the settlement agreement;
2. To make another reasonable proposal; or
3. To reject the agreement and consider your other legal options.

The right decision will depend on the strength of your potential claims, the value of the offer and your personal circumstances.

It is therefore important to understand what you could potentially recover if you do not settle.

Can I Negotiate More Money Without a Solicitor?

You can negotiate with your employer yourself, but obtaining independent legal advice can be valuable.

Settlement agreements often contain detailed legal provisions that can affect your future rights. A solicitor can identify issues that may not be obvious from simply looking at the proposed compensation figure.

Your employer may also have legal representation, so professional advice can help you understand whether the proposed settlement is reasonable and whether there is scope for negotiation.