Yes — a settlement agreement can deal with bonus payments, and it is often important that it does. What you are entitled to will usually depend on your employment contract, any bonus policy or other document governing any bonus payments.
How are bonuses dealt with in a settlement agreement?
If you are due a bonus, or would have been due one had you stayed, the settlement agreement may confirm whether it will be paid, how much it will be and when. Some bonuses are contractual, meaning your employer is typically obliged to pay them, while others are discretionary, meaning your employer generally has more freedom to decide. Even a discretionary bonus may be something you can raise as part of negotiating the overall settlement.
Bonus payments are usually taxed as earnings, so they generally do not benefit from the £30,000 tax-free threshold. Our article on how settlement agreement figures are calculated explains this in more detail.
Worth checking
Before you sign, check whether any bonus is mentioned at all, how much will be paid and when, and whether the bonus is described as contractual or discretionary.
What if I would lose a bonus by leaving?
Some bonus schemes require you to still be employed, or not be working your notice, on the date the bonus is paid, so it is worth checking whether your settlement agreement deals with any bonus you might otherwise miss out on. If you would lose a bonus by leaving, this may be a factor when negotiating the overall settlement figure.
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Get in touch →This article provides a high-level overview for general information purposes only and does not constitute legal advice. It should not be relied upon as a substitute for specific legal advice tailored to your individual circumstances.
Should you choose to formally instruct us, legal services will be provided by Nexa Law Limited. Employment Settlement Solicitor is a trading name of RJB Legal Services Ltd, a limited company registered in England and Wales with number 17353836. RJB Legal Services Ltd does not provide legal advice. RJB Legal Services is a consultant practice of Nexa Law Limited, a limited company registered in England and Wales with number 10209198, which is authorised and regulated by the Solicitors Regulation Authority under SRA number 633024.