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What are the payment complications with settlement agreements?

One of the more complicated aspects of settlement agreements often centre around which payments are taxable and which payments can be made tax free. The £30,000 tax free concession applies to payments made by way of compensation. Contractual payments such as payment in lieu of notice should not be paid tax free and the treatment of notice should be clear from the settlement document to avoid issues further down the line.

It is also important that the settlement agreement is effective to waive the specific employment claims which the employee may have. There are certain requirements which need to be met for settlement agreements to work, including allowing the employee to obtain independent legal advice on their position. We can guide you through the settlement agreement discussion from start to finish to ensure that a smooth exit is achieved to eliminate legal risk as far as possible.

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