Ex Gratia Payments – what are they and how can I get one?

‘Ex gratia’ is Latin for “from good will.”

Ex gratia payments in settlement agreements are great things if you can get them, because they offer a unique tax break only really available to employees who are leaving work after a dispute or redundancy situation.

Ex gratia payments are also known as ‘golden handshakes’ or ‘golden boots’. In essence they refer to a sum of money paid when there is no obligation or liability to pay it. For example, a lump sum payment over and above the pension benefits of a retiring employee.

An ex gratia payment in a settlement package means that it is a payment which your employer is not legally obliged to make under your contract of employment. It is normally a gesture of goodwill from your employer because they have treated you badly and acknowledge that you deserve some financial compensation.

What does ‘without prejudice’ mean?

Without prejudice is a legal term which means ‘without detriment to any right or claim’. In non-legal speak, this means that whatever is said or done on a without prejudice basis cannot later be used to your disadvantage should you decide to make a claim in an employment tribunal against your employer. So, generally speaking (and there are some exceptions), if without prejudice protection applies to a situation, whatever is said and done in that situation (whether it’s in a meeting, a letter, an email etc), cannot later be used in evidence or relied upon by any party.

This means that there is an element of protection for the parties in a dispute if they open discussions on a without prejudice basis. (It is also known as ‘without prejudice protection’, or ‘without prejudice privilege’.) Any discussions undertaken under the cloak of this protection or privilege are confidential between the parties.

In order for this protection to apply, there must be a genuine dispute between the parties, the correspondence or conversation must be declared to be on a without prejudice basis, and the discussions or correspondence which take place under without prejudice protection must be a genuine attempt to resolve this dispute.

When the without prejudice rule applies, the particular email, settlement agreement, or conversation which is without prejudice is something which the two parties in the employment dispute (you and your employer) have to keep off the record. So, if the case goes to tribunal, that without prejudice item cannot be brought to the attention of the tribunal or mentioned to the judge.

Full transcript:

So... today we are going to look at
expiration payments we're going to look
at what they are we could look at how to
get one and then we're going to look at
top tips on how to write and respond to
without prejudice letters all this
information is in the book the
resignation revolution which I have
written with Alex Monaco so if you want
a more in-depth look of what we're
talking about today get an Amazon go and
buy it so what is an ex closure payment
it is the goal of any employment law
negotiation it's also called termination
payment or severance payment or a
compensation payment effectively is a
payment given to employees for leaving
their job the important point to know
about ex croatia payments the brilliant
news is the first 30,000 pounds of it is
that means HMRC do not take a bite happy
days which means you can make the most
of leaving your job so if you think
about that if you are going to receive
three months gross pay as an exploration
payment you receive all of that money so
that that equates to around about four
and a half months actual net pay
depending on how much you earn so how do
you get well ultimately the crux of the
matter is your employer has to give you
so you're gonna have to explain to your
employer why you deserve one or why you
deserve a better one than they've
already offered you you need to take a
slightly different approach depending on
whether or not you've been made an offer
of an escalation payment via a
settlement agreement or you have yet to
be made an offer so we're going to be
dealing with those two scenarios today
let's look first at the scenario where
you haven't been made an offer but you
want your employer to make an offer a
settlement with an X ratio payment for
you to leave your job so if you have no
offer but you think you have a very good
case for let's say construct this
missile or discrimination then it's up
to you to tell your employer
how do you do it you do it via a without
prejudice letter doing this wire without
prejudice letter as opposed to a
grievance letter it's advantageous for
you if you want to leave your job the
reasons for this is because if an
employer receives a grievance letter it
is an open letter it is there for
everyone to see an employer must respond
to that grievance letter or risk
construct this missile or victimization
if the issues in that letter about
discrimination it is tempting for an
employer to respond to one of those
letters and to shut up shop and defend
their position because it is an open
process if on the other hand you simply
want to leave with an expiration payment
with a reference and move on to another
job the best way of handling this is
viable without prejudice procedure
because it is a closed procedure that
only you and your employer know about
and it is not open to a court or
employment tribunal to look at if you
use this procedure it is much more
likely your employer will look to settle
any claims you may have via an
escalation payment what should this
letter look like well firstly in the
first few sentences you should explain
what claims you believe you have in very
very brief detail
you should then list all your
achievements with the company only then
should you set out how you believe
you've been treated by the company or by
the person who's involved in treating
you badly set out facts names times
dates locations say to Alan
chronological order all this will build
your case explain that because of these
events you want to leave explain you
don't want to create a fuss you don't
want to bring a claim so you believe
this is best dealt with via a settlement
agreement only then should you set out
what you are willing to leave for so
this is where you tell your employer
your price for leaving you should be
asked if your notice to be paid in lieu
for any holiday pay
to be paid for any pension entitled
uhrin your note is to be paid for any
bonus we pay pro rata for another
benefits to be paid up but also and this
is a crucial part for that expiration
payment it is likely to the biggest
element of pain you receive always offer
more than you will be willing to accept
as a general rule of thumb you should
not be leaving your job for less than
three months pay unless you know you can
walk into a job next week
however do not expect to get paid more
than six months pay unless you have an
absolutely fantastic legal claim so if
you want six months gross pay then your
initial offer to your employer should be
nine months gross pay will look a little
bit more about how to negotiate in the
later part of this video if you have no
offer on the table and you do not think
you have a strong legal case but you
still want to leave your job with an
integration payment then it is slightly
trickier process it is unlikely in that
scenario that an approach via without
prejudice letter will elicit a positive
response from your employer your
employer will not simply pay you to
leave for no reason
therefore you have to make sure that
your employer makes the first move how
do you do this by using your employer's
procedures the first stage is to raise a
grievance if you want to leave your job
it must mean you're unhappy in your job
explain to your employer via the
grievance procedure why you are unhappy
in your job once you perceive this
procedure right to the end including an
appeal if necessary your employer should
get the impression that you're not happy
and want to leave at this stage they
might make you an offer a settlement
including an expiration payment if they
don't then it might be time to consider
raising a data subject access request
with them and ask for copies of all the
information that they hold on you it is
a very burdensome task to deal with your
employer will not thank you for
in fact they'll probably want me to
leave hopefully if they want you to
leave they will offer you a settlement
agreement and an exploration payment to
do so if having done this
nothing is forthcoming then it might be
worth writing it without prejudice
letter to them anyway explaining that
you want to leave under a settlement
agreement and explain your terms for
doing so now if you already have an
offer on the table then fantastic you
are in a very strong position you might
not think you are but you are the reason
why is because you know what your
employers position is your employer
wants you to leave your employer however
doesn't know your position you might
want to leave you might want to stay the
power is actually in your house however
your employer still holds the purse
strings so it's still up to you to
persuade them to increase that offer
here is how you do it the first thing to
remember is that unless you're facing
imminent dismissal for for example gross
misconduct or via a legitimate
redundancy procedure your employer
probably cannot dismiss you in the near
future so it is up to you to say okay if
you want me to leave then you have to
pay for the privilege or else I'm
staying now you already know your
employer wants you to go so that is the
ultimate bargaining chip the way you do
this is again by writing a letter on or
without prejudice basis the way you do
this is firstly you tell them how
surprised you are about having me made
an offer to leave you need to set out
again all your achievements you've had
with the company you then need to tackle
the reasons why they have told you
they've offered you a settlement
agreement if it's performance for
example explain to them why their
performance concerns are not valid next
explain that you don't want to leave
even if you do want to leave explain
that you don't then inform your employer
that you know that they cannot dismiss
you lawfully at the moment and that if
they do want to dismiss you it will take
many months and that you will resist it
this will ring alarm bells it will suck
in management time
and increase feeling about will within
the company lastly you should explain
that if your employer does want to
dismiss you now then you will not accept
the terms you've been offered you then
need to set out the terms that you want
to leave on the same points apply as
before set out you want your notice to
be paid in lieu your holiday paid paid
your benefits be paid and then set out
what you want as an ex Croatia payment
always start higher because your
employer is going to negotiate you down
if your employer having read your
without prejudice letter makes it
increased offer but it's not what you
realistically think you can achieve then
take a few days to think about it before
replying when you do apply reply at gain
via or without prejudice letter firstly
thank them for the increase in the offer
this will show you're being reasonable
and understanding it also shows you
recognize that they have moved from
their original position explain again
why you believe they should pay you more
it might be because it might take you a
long time to find another job it might
be because you've been with the company
for many years then make a counteroffer
move your offer to a point where you
think your employer will either accept
or more realistically to the edge of
this settlement zone now what do I mean
by the settlement zone well for example
if you want to achieve five months gross
salary as your registration payment but
your employer has only offered three and
you've initially offered it's let's say
eight or nine then you need to move to
seven seven months puts you exactly two
months outside your target and two
months off their target so your target
is right in the middle of the zone when
you're in this position the temptation
for your employer is to think well let's
just split the difference if your
employer does this then you will end up
in the middle of the zone on your target
your employer might however increase the
four months they might say take it or
leave it
to which your response is to either say
that the difference settle on five or
okay I will accept it if you increase it
to five the idea is to make it as easy
as possible for your employer to say yes
if your employer comes back and says no
to any increase that you have offered in
the expiration payment then you have to
play a little bit harder firstly think
about why they said no was your offer
too high does your employer fear being
dragged into a negotiation that will
never ever end in a settlement because
your expectations are too unrealistic
with the tone of your original letter
correct or is your employer genuinely
adopting to take it or leave it approach
once you have answered that question you
need to address it in your reply let's
take the scenario where your employer
has adopted a take-it-or-leave-it
approach is it realistic that your
employer has taken the huge step to
offer you a settlement agreement and the
termination of your employment only to
then say no if your employer says no you
will continue to work and we've already
established your employer does not want
you to continue to work your employer
has simply adopted this approach to
avoid paying you more in your
exploration payment so you need to call
your employer's Bluff explain that their
offer is not in your interest to accept
that you've made an improved offer and
unless your employer moves on its
position you will happily continue to
work so play a call the worst possible
scenario is you get to keep your job but
it's highly likely your employer will
make an increased offer if your employer
is playing hardball one thing you need
to investigate is whether or not they're
applying improper pressure an employer
cannot apply improper pressure in order
to force an employee to accept a
settlement agreement if they do whatever
they say is admissible in an employment
tribunal if you believe that they have
done this then raise that with them in
prejudice letter once again all this
information more explained in much
greater detail in our book the
resignation revolution