If you’re a senior executive facing a career transition, you may have been offered an employment settlement agreement. At your level, such agreements can be complex — and the financial and reputational stakes are often much higher. Understanding the proposed payout in your employment settlement agreement can be complicated.
This page explains how settlement packages are structured, what terms you should consider beyond compensation, and how to ensure the agreement reflects your position, contribution, and future career interests.
What is a Settlement Agreement?
An employment settlement agreement is a commonly used legal tool that sets out the terms on which your employment ends. It is a legally binding contract between the employee and the employer and needs to be signed on behalf of both parties and there is usually a provision which requires the employee to have legal advice on the terms of the agreement before they sign. One of the terms in the agreement will be a legal clause called a “waiver”. In return for waiving your right to bring legal claims (such as unfair dismissal, breach of contract, or discrimination), your employer will typically offer a financial settlement and other agreed terms.
For senior executives, settlement agreements often cover additional areas — such as share options, incentive schemes (“LTIPs”), restrictive covenants (e.g. non-compete agreements), confidentiality obligations, and the resignation from directorships. It’s vital that all such matters are handled with precision and discretion.
To be legally valid, you must receive independent legal advice. It is usual for your employer to offer a financial contribution to cover the cost of this advice as part of the agreement. The level of this financial contribution varies and can be negotiable.
How is the Settlement Figure Calculated?
For senior executives, the financial element of an employment settlement agreement typically includes:
- Contractual entitlements: These would be payments that the employer is required to make to the employee under the terms of the contract of employment. Typically they may include outstanding salary, holiday pay, bonuses, commission, and pay in lieu of notice (if applicable). These payments are taxable in the UK because they are part of the remuneration under the employment contract.
- Long-term incentives: Treatment of share options, deferred bonuses, and equity interests under LTIPs or similar schemes.
- Ex gratia compensation: A negotiated sum in recognition of the value of claims you’re waiving — and to achieve a clean and dignified exit. This element of the package is the financial premium which is offered by the employer as an incentive to encourage the employee to sign the agreement and waive their ability to bring any legal claims against the business.
Factors influencing the figure include:
- The strength and nature of any potential legal claims
- Terms of your contract or service agreement
- Your length of service, remuneration structure, and seniority
- Your employer’s desire to resolve matters discreetly
- Tax considerations (e.g. £30,000 tax-free threshold for termination payments)
What Non-financial Terms Can Be Included?
A well-drafted employment settlement agreement at executive level may include:
- Reputation management: Confidentiality, non-disparagement, and media statements
- References: Agreed wording for recruiters or regulatory bodies
- Exit communications: Messaging to staff, clients, or investors
- Company assets: Retention of devices or continued email access during handover
- Restrictive covenants: Waivers or adjustments to non-compete clauses
- Board resignation terms: Formal documentation of directorship resignations
These terms should support your future career plans and safeguard your reputation.
What is the Average Payout in an Employment Settlement Agreement?
There is no fixed average, but senior-level settlements often exceed 6–12 months’ total remuneration, especially where legal claims or reputational risks are a factor.
Where long-term incentives or share options are involved, the total value may be considerably higher.
Is There a Minimum Payout Figure?
There is no legal minimum for a settlement agreement. However, any offer should at least include:
- Your full contractual entitlements
- Earned but unpaid bonuses or incentives
- Redundancy or notice pay (if applicable)
As a senior executive, you may also have grounds to negotiate additional compensation depending on your circumstances.
Is There a Maximum Payout Figure?
There’s no legal cap. For executives, upper limits are guided by:
- Potential legal claims
- Shareholding or LTIP entitlements
- Tax structuring opportunities
- The employer’s desire to protect brand or boardroom stability
Handled carefully, settlement agreements can be structured to maximise both net payout and long-term positioning.
Specialist Legal Advice for Senior Executives
If you’ve been offered an employment settlement agreement, expert legal advice is essential. We regularly advise C-suite leaders, directors, and senior professionals — helping them exit on the best possible terms, both financially and reputationally.
📞 Contact us in confidence
Phone: 0330 223 3288
Email: carl@carlatkinsonlaw.co.uk
See our related Client Guides for further information:
Unlocking the secrets of Settlement Agreements https://www.carlatkinsonlaw.co.uk/unlocking-the-secrets-of-severance-and-settlement-agreements/
Breaking Free – Strategies for Handling Non-Compete Agreements https://www.carlatkinsonlaw.co.uk/non-compete-agreements/
