Settlement Agreements

What is an exit package?

An exit package (also known as a severance package or severance agreement) is something that may be offered or agreed when an employee’s employment is terminated. 

An exit package will usually be used when an employer needs to make redundancies, during disciplinary and grievance procedures or to settle genuine disputes such as potential claims for constructive dismissal, discrimination, harassment, victimisation and detriment for making a protected disclosure (also known as whistleblowing). 

If an employer is open to agreeing an exit package they will usually, especially if there is some kind of legal dispute, want an employee to sign a settlement agreement where the employee will agree to waive their right to bring any legal action against their employer which relates to their employment or its termination. 

Am I entitled to an exit package?

Employers do not have to offer an exit package or agree to one if the employee asks for one. However, as it is an amicable method of terminating employment which can protect the employer from litigation against them many employers will be open to considering an exit package. 

What is a good exit package?

There is no ‘one size fits all’ situation here. 

At a minimum an employee will want any contractual payments owed to them to be made such as notice pay, accrued but untaken holiday, wages, commission or bonuses owed or statutory redundancy pay, if relevant. The employee should also receive some kind of ex gratia payment if they are being required to sign a settlement agreement. 

After that what is ‘good’ will depend upon the strength of any claims the employee may have. As compensation in the Employment Tribunal is largely based upon losses each case will need to be looked at individually to assess what is appropriate. 

It may be crass, but a good starting point is for an employee to have a think about how much money they need – how long will it take the employee to find new employment? What outgoings do they need to cover in the interim? 

Further, an employee will want to weigh up resolving a potential claim quickly and amicably versus pursuing legal action. There is a risk that a busy employment tribunal may be unable to hear their case for many months (and in worst case scenarios over a year from issuing the claim). There are potential legal costs if the employee decides to be legally represented (legal costs rarely being awarded to the winning party) and ultimately, the risk of losing a claim. Taking this into account a lower ex-gratia sum may be worth considering for the comfort of the matter being resolved quickly and with limited legal fees.

The employee should have a think about any non-monetary elements that they want. Sometimes the removal of post-termination restrictions (also known as restraint of trade or restrictive covenants) can be more valuable than larger sums of money. If an employee is entering into an exit package due to a disagreement related to a performance improvement plan or because of a misconduct allegation against them, then an agreed and a somewhat guaranteed employment reference and a leaving announcement can be very helpful. It may also be possible to negotiate to retain equipment such as a laptop, mobile telephone and number or purchase a company car. 

Lastly, it may also be possible to negotiate a payment under a bonus, share or equity incentive scheme or an insurance policy such as medical insurance (although sometimes this just isn’t possible due to the nature of the scheme or insurer). 

Can an employee request an exit package?

Yes! An employee can approach an employer for an exit package. If the employee is approaching the employer due to a dispute they should mark all correspondence (including oral correspondence) as being ‘Without Prejudice’. If there is no dispute, then a ‘Protected Conversation’ could instead be invoked by the employee. Please click on the links above for an explanation of the difference between the two phrases. 

Do you need a solicitor? 

An employee doesn’t need a solicitor to negotiate an exit package, however, if the employer requires an employee to sign a settlement agreement then the employee will need advice from an independent adviser which will usually be a solicitor. 

That said, there can be an advantage by instructing a solicitor to negotiate an exit package on behalf of an employee. The solicitor will be able to explain to the employer clearly and robustly, if necessary, what claims the employee intends to pursue at the employment tribunal and why a certain level of compensation (or other elements such as the removal of restraint of trade) are suitable rather than fanciful. It also suggests the employee is serious about pursuing a claim so the employer will need to make a call regarding risking legal fees and its reputation. Solicitors can also be helpful if the employee does not have the confidence to approach and negotiate themselves or if they feel they need more clout to persuade their employer. 

However, if the working relationship is amicable – perhaps the role just isn’t working for the parties and there is no major breakdown of relations, then the employee may obtain a similar result by approaching the employer in the first instance. That said, it can sometimes be helpful for the employee to take some initial legal advice before they approach their employer themselves to give them an idea of what to ask for and whether any potential claims are likely to succeed at the employment tribunal. 

How we can help you

Our employment exit agreement package includes having a meeting (usually via Teams) to discuss the employee’s individual situation and to discuss what they are seeking in resolution. Thereafter, we can then approach the employer on your behalf and negotiate and advise you on the terms of exit package/settlement agreement.  

Our fee will usually depend upon the hourly rate of the solicitor advising you and we will always seek to try and recover the legal fees from your employer. 

If you would like to find out more about how we can assist you with an exit package then please complete our contact form and we will be in contact to arrange a suitable time to advise you.

*Please note that this article is intended as general information of what an exit package is and how we can help you and does not constitute legal advice. Therefore, no reliance should be placed on the content *

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