When presented with a settlement agreement, most people have not had time to secure a new role. If so, this clause can be accepted without worry. However, if negotiations are protracted or the timing works to your favour and you have secured another role or an offer, this clause will give you some cause for concern. The reason it’s included is because your employer wants to know it’s not paying you unnecessarily. If you pursue a claim the Employment Tribunal will award compensation based on your actual losses. If you have a new job then your loss of income is likely to be very low, if anything at all. Therefore, if your employer knows you have a new job, it may reduce or withdraw its offer, as its risk has significantly reduced. If you are in a situation where this clause appears and you have another job or offer, you probably have two options: 1 Accept the clause / say nothing This involves not telling your employer about the offer/new job. However, adopting this approach means you will be in breach of the settlement agreement immediately you sign it. Provided your current employer doesn’t find out (for example by being sent a reference request), you may be fine, but it’s not something we can guarantee. If your new employer finds out or later suspects that you are in breach, it may well seek recovery of its losses from you, and may require you to provide evidence to support when you were offered the new job. 2 Negotiate This usually means asking for the clause to be removed, as watering it down rarely works. However, even by asking for it to be removed, may raise suspicion from your employer and result in difficulties for you. While honesty is usually the best policy, being honest in this situation may well see your offer diminish or negotiations become more difficult, as it puts your employer in a much stronger negotiating position. We have various tactics to try and deal with this situation so if this is a position in which you find yourself, then do contact us for specialist advice. If any of the issues are of concern to you, you can contact one of our specialist settlement agreement solicitors on 01483 388 904 or hello@kilgannonlaw.co.uk

We’re still regularly seeing settlement agreements that have not been updated to reflect the law. If your settlement agreement hasn’t been professionally drafted then it may not accurately reflect the structure of the payments, which could have adverse tax consequences for you. This is possibly one of the most convoluted pieces of tax law that us poor employment solicitors need to grapple with. The Government’s way of explaining it seems back-to-front but can be accessed here https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim12810 Essentially, you need to ensure that all payments of wages are taxed. This includes any notice pay, including, any notice that is paid after your employment has ended (hence PENP). Previously, people tried to claim that payments in lieu of notice could be paid free of income tax, but the change in law has stopped this. Only once all your contractual elements (salary, notice, holiday pay, bonus) have been paid and taxed can you then access the tax-free amount where up to £30,000 can be paid free from tax and NIC. While we’re not tax experts, we are very familiar with the structure your settlement agreement should take and how exposed you might be. Don’t forget the dreaded tax indemnity, which make you liable for any further payments of tax and NIC, as we explain at point 2 in the following section of our web site https://www.settlementagreementssurrey.co.uk/what-are-the-important-clauses-in-my-settlement-agreement . If any of the issues are of concern to you, you can contact one of our specialist settlement agreement solicitors on 01483 388 904 or hello@kilgannonlaw.co.uk