What is an ex- gratia payment?

October 14, 2021

An ex-gratia payment is a payment made to an employee (or former employee) by an employer where there is no legal obligation for such a payment to be made. 

It is the name given to describe a payment that is over and above the sums you are entitled to receive (like for example salary, notice pay or holiday pay that you may be contractually entitled to). 

In other words it is an extra, goodwill payment.   Such payments are frequently made on termination of employment to smooth a difficult exit or to resolve a dispute, and are often made following a protected conversation.

If an employer is willing to pay an ex-gratia payment they are likely to require you to sign a settlement agreement. 

This is a binding contract confirming that you will give up all potential claims against your employer in return for the ex-gratia payment.

Depending on the facts of your case there may be scope to negotiate an ex gratia payment, and we frequently support employees in that process or can conduct negotiations on your behalf.   

Depending on the facts, there is usually scope for the first £30,000 of any ex gratia payment to be paid tax free without deductions for income tax and national insurance.  The team here can advise you on this - just send us a message.

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This website contains a summary of various aspects of employment law. It is not intended to provide legal advice for specific cases. No liability is accepted for reliance on any of the information on this website. If advice is required please contact the firm. Settlement Agreements UK is the trading name of Julian Taylor Solicitors Limited, a company registered in England and Wales with registration number 7171586. Julian Taylor Solicitors Limited is recognised and regulated by the Solicitors Regulation Authority and all of its directors and members are solicitors of England and Wales.

Julian Taylor Solicitors Limited is recognised and regulated by the Solicitors Regulation Authority with registered number 533592 www.sra.org.uk
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