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A redundancy figure can look generous until you separate what your employer already owes you from the amount being offered for a clean, agreed departure. Knowing how to calculate redundancy settlement pay helps you assess whether the proposal is fair, identify missing sums and decide whether there is room to negotiate before signing anything.

In the UK, a redundancy settlement is rarely one single payment. It may include statutory redundancy pay, notice pay, accrued holiday, an enhanced redundancy sum and sometimes an additional payment under a settlement agreement. Each part is calculated and taxed differently. The wording matters as much as the headline figure.

Start by separating the payments

Ask for a written breakdown rather than relying on a total. A clear proposal should distinguish between your contractual and statutory entitlements, which you would normally receive even without a settlement agreement, and any additional compensation offered in exchange for settling potential claims.

The main elements are usually statutory redundancy pay, contractual or enhanced redundancy pay, notice pay or pay in lieu of notice, untaken holiday pay, unpaid salary, bonus or commission, benefits during notice, and an ex gratia termination payment. Not every package will contain every element, but combining them without explanation can make a modest offer appear larger than it is.

For example, if an employer offers £25,000, that is not necessarily £25,000 of extra compensation. It could include £10,000 statutory redundancy pay, £6,000 notice pay, £2,000 holiday pay and £7,000 as an additional settlement payment. The first three figures may already be due under your contract or the law.

How to calculate statutory redundancy pay

Employees with at least two years’ continuous service are generally entitled to statutory redundancy pay if they are genuinely being made redundant. The calculation is based on three things: your age, length of continuous service and weekly pay.

The statutory formula is:

• half a week’s pay for each full year of service when you were under 22;
• one week’s pay for each full year of service when you were aged 22 to 40; and
• one and a half weeks’ pay for each full year of service when you were 41 or over.

Only a maximum of 20 years’ service counts. There is also a statutory cap on a week’s pay, which changes each April. If your actual weekly earnings exceed that cap, the statutory calculation must use the capped figure instead. This is why a long-serving, highly paid employee may receive a lower statutory amount than expected.

Your employer should use your age at the date your employment ends, not the date consultation begins or the date you receive the proposal. Continuous service can be more complicated where there have been changes of role, group companies, temporary breaks or transfers. It is sensible to check this carefully rather than assume the start date on a payslip tells the whole story.

A simple statutory redundancy example

Suppose you are 45 when your employment ends, have worked continuously for 12 full years and your weekly pay is below the statutory cap. Your entitlement would usually be calculated as 12 years multiplied by one and a half weeks’ pay: 18 weeks’ pay in total.

If you turned 41 during those 12 years, the calculation is split. Years worked before age 41 attract one week’s pay, while years worked from age 41 attract one and a half weeks’ pay. The detail can make a meaningful difference.

Statutory redundancy pay is a legal minimum, not necessarily the appropriate final settlement figure. A contract, staff handbook, collective agreement or established employer practice may provide a better enhanced redundancy formula.

Check the enhanced redundancy terms

Many employers offer enhanced redundancy pay, particularly where there is a wider restructuring or a desire to agree an amicable exit. An enhanced scheme might provide, for instance, a set number of weeks’ actual pay for every completed year of service, sometimes with an additional lump sum.

There is no universal formula. The key question is whether the scheme is contractual, discretionary or part of a negotiated settlement. If it is contractual, the employer may be bound by it. If it is discretionary, there may still be scope to question an inconsistent approach, especially if colleagues in comparable roles have been treated more favourably.

When comparing an enhanced offer, calculate the value using your actual weekly or monthly salary, then compare it with statutory redundancy pay. Also check whether the employer has imposed a cap, excluded bonus or commission, or counted only completed years of service. These provisions can materially reduce the figure.

Add what you are owed during notice

Redundancy does not remove your right to notice. Your minimum statutory notice is one week for each complete year of service, up to 12 weeks, after one month’s employment. Your contract may provide a longer notice period, which will usually apply if it is more favourable.

You may work your notice, be placed on garden leave, or receive a payment in lieu of notice, often called PILON. The agreement or contract should make clear which applies. If you are paid in lieu, check whether the payment covers basic salary only or also pension contributions, car allowance, private medical cover, commission and other benefits that would have continued during notice.

Notice pay is normally subject to tax and National Insurance contributions. It should not be presented as tax-free compensation simply because it is paid alongside redundancy money.

Include holiday, salary and variable pay

You should also be paid for holiday accrued but not taken by your termination date. Check the holiday year in your contract and calculate entitlement on a pro-rata basis. If you have taken more holiday than accrued, an employer may seek to deduct the excess only where the contract permits it.

Outstanding salary, expenses, bonus and commission need separate attention. Whether a bonus or commission payment is due will depend on the scheme rules, your contract and the point at which the entitlement arose. A payment that is described as discretionary is not automatically unavailable, particularly where targets were achieved before termination.

For senior employees, the value of share awards, long-term incentives and deferred bonus arrangements may exceed the basic redundancy sum. The treatment of these awards should be expressly addressed rather than left to a vague statement that benefits will end on termination.

Understand tax before comparing figures

A common source of confusion is the £30,000 tax exemption. In broad terms, genuine termination compensation, including statutory redundancy pay, can often be paid free of income tax up to £30,000. Amounts above that threshold are usually taxable. Employer National Insurance contributions may also arise on taxable amounts above £30,000.

However, notice pay, holiday pay, wages, bonuses and many contractual payments are generally taxable in the normal way. The tax label in a settlement agreement does not decide the position by itself. HMRC looks at the substance of the payment.

Ask whether the figures are gross or net, which deductions will be made and whether the employer gives any tax indemnity. A tax indemnity can make you responsible if HMRC later decides that tax should have been deducted, so it deserves careful review. A proposed payment that appears higher on paper may be worth less after tax than a smaller, properly structured alternative.

Assess the additional settlement payment

A settlement agreement is voluntary. In return for compensation, you are normally asked to waive specific employment claims and accept confidentiality, non-disparagement and other obligations. That additional payment should reflect more than your statutory redundancy entitlement.

There is no fixed multiplier that makes an offer fair. The right figure depends on the strength and value of any potential claims, the quality of the redundancy process, your length of service, seniority, notice rights, prospects of finding a new role and the terms you are being asked to accept. A restrictive covenant, an unfavourable reference clause or a broad confidentiality provision may justify negotiating for better terms, not merely more money.

It is also worth considering the practical value of non-financial protections. An agreed reference, a clear internal and external announcement, continued benefits for a period and a contribution to independent legal advice can be highly important to your next move.

A practical way to check the offer

Before you decide, create a side-by-side calculation. In one column, list the sums you are already entitled to receive: statutory or contractual redundancy pay, notice, holiday, salary and any earned variable pay. In the other, list the genuinely additional compensation and the non-financial terms offered for signing the agreement.

Then check the dates. A payment due on termination is different from one paid in the next payroll cycle, and a vague promise about a bonus or reference may be difficult to enforce later. Ensure the settlement agreement records the agreed figures, payment dates, tax treatment and any agreed reference in precise terms.

You are usually given a period to consider a proposed settlement agreement, and the agreement will need independent legal advice before it can validly waive statutory employment claims. Do not feel pressured to treat the first figure as final. A focused review can establish whether the calculation is correct and whether the terms protect your interests.

A redundancy settlement should leave you with clarity, not unanswered questions. Once every component has been identified and valued, you can approach the conversation with confidence and ask for an outcome that reflects both what you are owed and what you are being asked to give up.

A proposed exit can arrive with a short deadline, a large legal document and a figure that looks final. It rarely is. Exit package terms shape not only what you receive when you leave, but also what you can say, whether you can work for a competitor and how confidently you can move into your next role. Before signing a settlement agreement, take time to understand exactly what you are giving up and what you are receiving in return.

A settlement agreement is designed to create certainty. In exchange for compensation or other agreed benefits, an employee usually agrees not to bring specified employment claims against their employer. For that waiver to be valid, you must receive independent legal advice. That requirement is there to protect you, not merely to complete a formality.

What exit package terms usually cover

An exit package is more than a settlement sum. Its terms should deal clearly with the practical and legal consequences of leaving. The starting point is your contract, your length of service, the reason for the proposed exit and any potential claims or disputes. A fair package for a redundancy situation may look very different from one offered after a grievance, disciplinary process or senior-level departure.

Most agreements address the following areas:

• your termination date, notice period and whether you will work, garden leave or receive pay in lieu of notice;
• salary, holiday pay, bonus, commission, benefits and pension arrangements up to termination;
• statutory redundancy pay, enhanced redundancy pay or an ex gratia compensation payment;
• the claims you are being asked to waive;
• confidentiality, non-disparagement and post-termination restrictions; and
• the wording of a reference and the employer’s contribution to your legal-advice fee.

The wording matters as much as the headline number. A payment can be described in a way that affects tax, timing or entitlement. A reference can be promised in principle but left too vague to be useful. Restrictions may be repeated from your contract, expanded, or presented as new obligations.

Start with the money, but do not stop there

Compensation is usually the first concern, and understandably so. Ask for a clear breakdown of every payment rather than accepting one total figure. Your agreement should distinguish between unpaid salary, notice pay, holiday pay, redundancy pay, bonus or commission, and compensation for ending employment.

Some termination payments may benefit from the £30,000 tax exemption, but this is not automatic and not every payment qualifies. Salary, accrued holiday pay and most payments in lieu of notice are normally taxed through PAYE. The tax treatment of bonuses, shares, benefits and payments connected with restrictive covenants can also require careful review. If the stated sum is gross, make sure you understand what you are likely to receive after deductions.

It is also sensible to check when payment will be made. Seven, 14 or 28 days after termination are common arrangements, but the right date depends on your circumstances. If you need funds before a new role begins, a later payment date may not be practical. Equally, an employer may need time to process payroll correctly. The agreement should state the payment dates and what happens if payment is delayed.

Where you are entitled to a bonus, commission or long-term incentive award, do not assume it disappears because you are leaving. The relevant scheme rules, performance period, payment date and any discretion reserved to the employer all matter. A negotiated exit may be the opportunity to agree a fair treatment that the contract alone would not provide.

Check what rights you are being asked to waive

A settlement agreement should identify the particular claims being settled. This may include claims relating to unfair dismissal, redundancy, discrimination, whistleblowing detriment, wages, holiday pay or breach of contract. Broad language can be normal, but you should understand the practical scope of the waiver before accepting it.

The central question is whether the compensation properly reflects the rights and circumstances you are being asked to settle. There is no fixed formula. The appropriate figure can depend on the strength of a potential claim, the salary and benefits at stake, how long it may take to find another role, your notice and redundancy entitlements, and the value of avoiding a difficult process.

You do not need to decide whether you would definitely win a tribunal claim before negotiating. A settlement is often about balancing risk, time, stress and certainty. However, you should not sign simply because an employer describes an offer as standard or final. Independent advice can help you assess whether the package reflects your position and whether a counterproposal is worthwhile.

Notice, benefits and the last day of employment

Your termination date can have wider consequences than expected. It may affect bonus eligibility, private medical cover, life assurance, pension contributions, share plans and the period in which you remain employed for continuity purposes. Check whether you are expected to work notice, placed on garden leave or released immediately.

Garden leave can preserve salary and contractual benefits while keeping you away from work. That can be useful, but it may also delay the date you can start a new role. If you are paid in lieu of notice, confirm whether that payment includes all elements you would have received during notice, such as car allowance, pension contributions or commission where relevant.

Holiday is another frequent source of confusion. The agreement should say how much holiday has accrued, whether any has been taken, and how any remaining entitlement will be paid. Do not rely on an estimate if your working pattern, carry-over entitlement or recent absence makes the calculation less straightforward.

Confidentiality and restrictive covenants deserve close attention

Confidentiality clauses are common and can be reasonable. They usually protect trade secrets, commercially sensitive information and the details of negotiations. They should not be drafted so widely that you cannot speak to your partner, professional advisers, HMRC, a regulator or a prospective employer where appropriate. A valid agreement cannot prevent protected whistleblowing disclosures.

Look carefully at any non-disparagement wording too. A mutual commitment can be more balanced than a one-sided obligation. If the employer expects you to avoid public criticism, it may be reasonable to ask that it makes a matching commitment through its senior representatives.

Restrictive covenants can be particularly significant for senior employees, sales professionals and those moving within a specialist market. Restrictions on working for competitors, soliciting clients or dealing with former contacts may already exist in your contract. An agreement should not casually strengthen them, lengthen them or introduce them without proper consideration. If a future job could be affected, raise this before signing rather than trying to resolve it after accepting the terms.

Agree the reference in writing

For many employees, an agreed reference is as valuable as part of the financial package. A clause stating that the employer will provide a reference is better than an informal assurance, but the strongest approach is to attach the agreed wording to the settlement agreement.

A factual reference confirming job title and dates may be sufficient where you have already secured a new role. In other cases, you may want it to include a brief statement about your responsibilities, contribution or reason for leaving. Employers are not generally required to provide a reference, so agreeing its precise wording can remove uncertainty later.

Also consider internal communications. The agreement can record how your departure will be announced to colleagues, clients and suppliers. This is especially useful where a vague or poorly handled announcement could harm professional relationships.

Do not let the deadline prevent proper advice

ACAS guidance generally recommends giving employees at least 10 calendar days to consider the written terms of a proposed settlement agreement. Circumstances vary, and an earlier response may be appropriate if you have had advice and genuinely want to proceed. But pressure to sign quickly is a reason to slow down, not to skip the review.

You can usually ask for more time, clarification or revised drafting. Negotiations are often conducted on a without prejudice basis or through protected conversations, although the legal position depends on the facts. Keep communications measured and avoid resigning, admitting allegations or accepting terms verbally before you know what the document says.

An employer will commonly contribute towards the cost of independent legal advice. That contribution may cover a straightforward review, but more detailed negotiations can require additional work. The point of advice is not simply to sign the adviser’s certificate. It is to receive clear, independent guidance on whether the exit package terms are fair, compliant and workable for you.

A practical way to approach the agreement

Read the agreement alongside your employment contract, any redundancy consultation documents, bonus or commission plans, recent payslips and relevant correspondence. Make a note of what has been promised verbally, including the payment figure, reference and last working day. Then compare those points against the written terms.

If something is unclear, ask a direct question: is the payment gross or net; are benefits continuing through notice; is the reference attached; does the restriction prevent your next role; and which claims are being settled? Clear questions often reveal where a term needs changing.

A settlement agreement can provide a clean, dignified and financially secure departure. But it should do so on terms you understand. The right next step is not to rush towards a signature, but to obtain independent advice that gives you confidence in the decision you make.

A meeting labelled “protected” can feel final, particularly where your employer raises a settlement agreement or suggests that your role may be at risk. Protected conversation employment law can allow certain exit discussions to take place off the record, but it does not remove your rights or require you to accept the first proposal put to you.

For employees, the practical priority is to understand what has been said, what is being offered, and what claims or rights may be affected before signing anything. For employers, the protection is useful but limited. It is not a licence to pressure someone into leaving or to overlook a fair process.

What is a protected conversation?

A protected conversation is a discussion between an employer and employee about ending employment on agreed terms. It is also known as a pre-termination negotiation. Under section 111A of the Employment Rights Act 1996, the content of that discussion will usually be inadmissible in an ordinary unfair dismissal claim.

The purpose is to give both sides room to explore a possible agreement. An employer may say that it would prefer an agreed departure rather than a formal performance, disciplinary, redundancy or dismissal process. An employee can consider the proposal without the conversation automatically being used in an ordinary unfair dismissal tribunal claim if talks do not lead to an agreement.

This can be helpful where there is a genuine commercial wish to reach a clean and amicable exit. It can reduce the strain of a prolonged workplace dispute and create an opportunity to negotiate compensation, a reference and a sensible leaving date.

It does not, however, mean that the meeting is legally irrelevant, entirely secret, or protected in every type of claim.

When protected conversation employment law applies

The statutory protection is narrow. It applies to evidence of pre-termination negotiations where the claim is for ordinary unfair dismissal. Ordinary unfair dismissal generally concerns whether an employer had a fair reason and followed a fair process when dismissing an employee with the necessary qualifying service.

It does not prevent a tribunal hearing evidence about the conversation in claims involving discrimination, whistleblowing, breach of contract, wrongful dismissal, harassment, victimisation, holiday pay, wages, or many forms of automatic unfair dismissal. For example, if an employee says they were selected for dismissal because of pregnancy, disability, trade union activity or making a protected disclosure, the employer cannot simply rely on the word “protected” to keep the discussion out of evidence.

The protection may also be lost where there has been improper behaviour. This is fact-specific, but examples can include bullying, intimidation, discrimination, threats, misleading statements or unreasonable pressure to accept terms. Giving an employee an unreasonably short deadline can be a concern, especially where they need to obtain independent legal advice.

ACAS guidance suggests allowing at least 10 calendar days for an employee to consider a written settlement agreement and receive advice. This is guidance rather than an absolute rule, but it is a useful benchmark for fair and sensible negotiations.

Protected conversations and without prejudice discussions are different

These two terms are often used interchangeably, but they work differently.

A without prejudice discussion is protected by common law. It normally requires an existing dispute and a genuine attempt to settle it. It can potentially cover a wider range of employment claims than a protected conversation, provided the legal conditions are met.

A protected conversation does not require an existing dispute. That is why an employer may use it early, before raising a formal issue or beginning a formal process. Its protection is narrower because it is generally limited to ordinary unfair dismissal proceedings.

The label used in an email or meeting invitation is not decisive. Calling a meeting “without prejudice” or “protected” does not itself create protection. The tribunal will consider the substance of what happened, the claims being made and whether either party behaved improperly.

You do not have to accept an offer in the meeting

An employer may make a proposal verbally and follow it with a draft settlement agreement. You are entitled to take time, ask questions and obtain advice before deciding whether the terms are fair. You do not need to sign on the spot.

A settlement agreement is a legally binding contract. In return for compensation or other agreed benefits, it will usually require you to waive specified employment claims. Once signed, it can significantly restrict your ability to bring a tribunal claim about matters covered by the agreement.

For that reason, a valid settlement agreement must identify the legal adviser who has given you independent advice and confirm that the adviser has professional insurance. The agreement must also set out the particular claims being settled. General assurances that you have “no claims” are not enough on their own.

Independent advice should be more than a signature on a certificate. It should explain the rights you may be giving up, the value of the offer, the tax position, ongoing restrictions and the practical consequences of proposed wording.

What to check before responding

The right response depends on your circumstances. Someone facing a genuine redundancy exercise may focus on whether their statutory redundancy pay, notice pay and enhanced package have been calculated properly. A senior employee with restrictive covenants may need to consider whether a new role is affected. Where there are concerns about discrimination, whistleblowing or an unfair process, the legal position may influence both negotiation strategy and the appropriate level of compensation.

Before accepting, look carefully at four areas:

• The payment: Separate notice pay, holiday pay, redundancy pay, bonus, commission and any ex gratia compensation. The tax treatment should be clear, as not every payment can be made tax free.
• The claims being waived: Check that the agreement identifies the relevant statutory claims and does not seek to settle matters that should remain outside its scope.
• Your future position: Agree a reference where possible, review confidentiality terms, and check whether restrictive covenants or non-derogatory statements are reasonable.
• The timetable and process: Confirm your termination date, whether you will work notice or be placed on garden leave, when payments will be made, and what happens to benefits, shares, equipment and expenses.

It may also be appropriate to ask why the offer has been made and whether a formal process is being paused. You need not challenge every point in the protected meeting itself. A measured written response, after advice, often provides a clearer basis for negotiation.

How to handle the conversation calmly

If you are invited to a protected conversation, listen carefully and take notes after the meeting. Ask for the proposal in writing. Do not feel pushed into giving an immediate answer, and avoid agreeing to terms you have not seen or understood.

You can say that you will consider the proposal once you have received the draft agreement and legal advice. If the employer asks you to keep the discussion confidential, ask what they mean in practice. You should still be able to speak to your legal adviser, and potentially to your partner or immediate family where appropriate. The wording of any confidentiality obligation should be reviewed rather than assumed.

If the discussion felt threatening, discriminatory or misleading, make a contemporaneous note of the exact words used, who was present and any deadlines imposed. That record can matter if there is later disagreement about whether the statutory protection applies.

Employers should approach these conversations with equal care. A clear explanation, realistic time to consider terms and a properly drafted agreement are more likely to support an amicable outcome than a rushed demand. The aim should be certainty for both parties, not simply speed.

Getting clear advice before you sign

A protected conversation can be the start of a constructive negotiation, but it can also arrive when you are worried about your income, reputation and next role. Those pressures make it harder to judge whether an offer genuinely reflects what you are being asked to give up.

A specialist review can assess the proposed compensation against your circumstances, explain the claims covered by the agreement and identify terms worth improving. Arcos Settlement Agreements provides clear, independent advice on settlement agreements so that employees can make an informed decision with confidence.

The most useful next step is usually straightforward: obtain the draft in writing, preserve your notes, and take advice before the deadline. A fair agreement should give you clarity about the end of your employment and a workable foundation for what comes next.

A settlement agreement arriving during pregnancy, maternity leave or shortly after your return to work can feel particularly unsettling. Knowing how to negotiate maternity settlement terms means first recognising that you do not have to accept the first offer, or make a decision before you understand what you may be giving up.

A proposed agreement is usually intended to bring the employment relationship to an agreed end and prevent future claims. It can offer useful certainty, but it may also ask you to waive valuable rights relating to pregnancy or maternity discrimination, unfair dismissal, notice pay and other matters. The right outcome depends on the facts, your financial position and what you want to happen next.

Start by understanding what is being settled

“Maternity settlement” is not a separate legal category. Usually, it means a settlement agreement proposed while you are pregnant, on maternity leave, planning to return, or have recently returned to work. The employer may describe the discussion as a redundancy process, a restructure, a performance concern, a breakdown in relations or a mutual agreement to part ways.

The wording matters less than the circumstances. If you believe the proposal is connected to your pregnancy, maternity leave, plans to take leave, flexible-working request or return to work, this may affect the value of your potential claims and your negotiating position.

Do not assume that an employer has acted unlawfully simply because it makes an offer. Equally, do not assume that a pleasant conversation or a standard document means the terms are fair. A proper review considers the timeline, the reason given for the proposed exit, how colleagues have been treated and the evidence available.

For a settlement agreement to be valid, you must receive advice from an independent relevant adviser on its terms and effect. Employers commonly contribute towards the cost of that advice. That contribution should enable you to obtain a clear explanation of the agreement, although more detailed negotiations may require a separate discussion about fees.

How to negotiate maternity settlement terms

The most effective negotiation is usually calm, evidence-led and specific. You do not need to make threats or accept an employer’s view of the situation. Ask for enough time to take advice, establish what you would receive without an agreement, then make a reasoned counterproposal where appropriate.

Establish your financial baseline first

Before considering the proposed settlement payment, calculate what you are already entitled to receive. This may include salary to the termination date, notice pay, accrued but untaken holiday, pension contributions, bonus or commission, and any contractual benefits due under your employment contract.

If there is a genuine redundancy situation, statutory redundancy pay may also be payable if you qualify. It should not simply be presented as a generous settlement figure when it is an amount you would receive anyway.

Maternity leave does not stop holiday accruing. You should also check how the agreement deals with enhanced maternity pay, contractual maternity benefits and any suggestion that you must repay sums on leaving. A repayment clause may be enforceable in some circumstances, but it is not automatically decisive and should be reviewed against your contract and the facts.

Your settlement payment is the amount offered above your existing contractual and statutory entitlements in return for settling claims and agreeing the other terms. That distinction gives the negotiation a more realistic starting point.

Consider the strength and value of potential claims

An employer may make an offer because it wants certainty, confidentiality and a clean end to the relationship. Your adviser will assess the legal risks on both sides, rather than simply applying a formula to your salary.

Relevant questions may include whether you were selected for redundancy while on leave, whether suitable alternative vacancies were offered, whether your role genuinely disappeared, whether comments were made about your pregnancy or childcare, and whether you were disadvantaged after raising concerns. The timing of events can be highly relevant.

Compensation is not automatic just because a claim could be brought. It depends on evidence, likely financial loss, the uncertainty and time involved in litigation, and the employer’s appetite to resolve the matter. A sensible settlement reflects those risks without requiring you to pursue a tribunal claim to its conclusion.

Negotiate more than the headline figure

Money matters, particularly where you are preparing for a period without income or arranging childcare. However, a fair agreement often depends on several terms working together.

You may wish to negotiate:

• the termination date, especially where additional salary, maternity benefits, pension contributions or private medical cover are valuable;
• payment in lieu of notice and whether notice is treated correctly for tax and contractual purposes;
• accrued holiday and any outstanding bonus, commission or expenses;
• an agreed factual or positive reference, ideally attached to the agreement;
• the wording of any announcement to colleagues, clients or suppliers;
• restrictive covenants, confidentiality obligations and non-disparagement clauses; and
• a higher employer contribution towards legal fees where negotiations are more involved.

A reference can be as important as a modest increase in compensation if you need a new role promptly. If the employer agrees a reference, avoid relying on a verbal assurance. The agreed wording, who will provide it and whether they will depart from it should be set out clearly.

Restrictive covenants deserve careful attention too. An agreement may repeat or strengthen restrictions on working for competitors, approaching clients or recruiting former colleagues. You should not accept wider restrictions as a routine condition of settlement without understanding the practical effect on your next move.

Check tax treatment, but do not treat it as a negotiation shortcut

Settlement agreements often divide payments into categories. Salary, holiday pay, bonus payments and notice-related payments are commonly subject to deductions for tax and National Insurance. A qualifying non-contractual termination payment may benefit from the £30,000 tax exemption, but tax treatment depends on the nature of each payment, not the label used in the agreement.

Ask for the payment breakdown to be clear. If the agreement says that you are responsible for tax liabilities, this is common, but it should not excuse inaccurate treatment by the employer. It is better to resolve uncertainty before signing than to discover a disagreement after payment has been made.

A practical approach to the conversation

It is usually best not to negotiate in a rushed meeting, particularly if you are upset or still processing the proposal. You can acknowledge receipt, say you are taking independent legal advice and ask for a reasonable period to respond. Keep communications professional and retain copies of relevant emails, letters, meeting notes, payslips and your contract.

Your counterproposal should be focused. It might explain that the proposed payment does not adequately reflect your potential claims and the loss of income arising from the proposed termination, then set out the revised sum and non-financial terms you seek. You do not need to disclose every detail of your evidence at the outset, but you should avoid making allegations you cannot support.

Where the facts are sensitive, an adviser can negotiate on your behalf. This can create distance from a difficult workplace conversation while keeping the discussion constructive. At Arcos Settlement Agreements, the focus is on clear, independent advice about whether the proposed terms protect your position and what changes are worth seeking.

Do not overlook timing and pressure

Settlement offers are often made on a confidential basis, sometimes described as “without prejudice” or as a protected conversation. Those labels do not mean an employer can pressure you into signing or that every aspect of the discussion is beyond scrutiny. Context matters, particularly where pregnancy or maternity discrimination is alleged.

Employment tribunal time limits can be short, and settlement discussions do not necessarily protect your position against every deadline. If you are concerned about discrimination, dismissal or redundancy selection, obtain advice promptly rather than waiting for negotiations to drift on.

You should also be cautious about resigning to improve an offer or signing a document before your adviser has reviewed all versions. Small amendments to dates, payments, claims waived or confidentiality wording can have significant consequences.

A maternity-related settlement should give you confidence about your financial position and your next step, not leave you wondering what you have surrendered. Take the time to understand the terms, ask for what is reasonable and make your decision only once the agreement reflects a fair and workable outcome.