What to look for in an employment settlement

When considering an exit package, or any kind of negotiated settlement, several factors need to be considered:

Lost wages. Usually 3 months is the maximum. There are some exceptions. Commonly 1-2 months are offered.

Section 123(1)(c)(i) tax free payments for hurt and humiliation. Common amounts range from $5,000-$10,000. Sometimes they are lower – depending on the circumstances of the case and the employer, however, we have had success with obtaining much higher settlements of over $40,000. Care needs to be taken in structuring these settlements right. If done wrong they could expose you to unwanted attention from the IRD together with substantial tax penalties.

Costs. Sometimes an explicit amount is agreed for your costs, other times a global settlement amount will be agreed and your costs will form one part of that amount.

Benefits: for example, medical insurance, superannuation schemes, EAP assistance. The parties need to agree how and when these will finish being the employer’s responsibility.

Protecting your reputation: issues here include references, agreements not to say anything negative about the former employee, providing third parties with agreed reasons for leaving, removal of warnings from your employment file, converting a dismissal into a resignation, and apologies.

Everyone has different needs in terms of what they need to obtain out of a settlement in order to allow them to move on with dignity. Please contact us if we can help.