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Redundancy by sectorBanking & Finance redundancy: your rights, pay and settlement agreements
Enhanced redundancy terms, bonus and share award treatment, restrictive covenants and tax on banking and finance settlement agreements explained.
Banks, insurers, asset managers and other financial services firms often restructure in response to regulatory change, cost pressure or shifts in strategy, and redundancy packages in the sector are frequently more generous than the statutory minimum, particularly for senior and long-serving staff. Pay in finance often includes bonuses, deferred share awards and other incentives, which raises additional questions on redundancy about vesting, clawback and how bonus is treated in any settlement. Restrictive covenants and garden leave are common in employment contracts, and firms will usually want these confirmed or varied in a settlement agreement. Settlement agreements are widely used in the sector for both redundancy exits and negotiated departures.
Key points
- Enhanced contractual redundancy terms are common in finance and can exceed the statutory minimum significantly.
- Deferred bonuses, share awards and clawback provisions need separate, careful review in any exit.
- Restrictive covenants and garden leave clauses are frequently negotiated as part of a settlement agreement.
- Only the first £30,000 of a genuine termination payment is tax-free; PILON and bonus are usually taxed.
Settlement agreements in banking and finance
Settlement agreements are common in banking and finance, often used to agree an enhanced payment, confirm treatment of deferred bonus or share awards, and to vary or confirm restrictive covenants and garden leave. Only the first £30,000 of a genuine termination payment is tax-free, and other elements such as PILON and bonus payments are usually taxable in full. Because remuneration structures are complex, legal advice, which the employer usually pays for, should cover both payment terms and covenants.
Been offered a settlement agreement?
If your banking and finance employer has offered you a settlement agreement as part of a redundancy, we will review it the same working day and tell you honestly whether the offer is fair. Free to you when your employer pays our fee, which is the case in nearly every UK settlement agreement.
Banking & Finance redundancy: frequently asked questions
What happens to my bonus or share awards if I am made redundant?
Treatment depends on the specific scheme rules and your contract, which will usually address whether unvested awards lapse, continue to vest, or are paid out on redundancy, and whether any clawback applies. This is often one of the most valuable and most negotiated elements of a finance sector settlement agreement, so it needs specific review rather than assuming standard redundancy rules apply.
Are restrictive covenants enforceable after redundancy in finance roles?
Restrictive covenants such as non-compete or non-solicitation clauses can still apply after redundancy if they are reasonable and properly drafted, and firms in finance often place particular weight on them. A settlement agreement sometimes varies, shortens or confirms these covenants in exchange for payment, so it is worth having them reviewed alongside the financial terms.
Is my redundancy payment from a bank tax-free?
The first £30,000 of a genuine termination payment is usually tax-free, but elements such as pay in lieu of notice, contractual bonus and any payment linked to services rendered are normally taxable. Given the complexity of finance sector pay structures, it is worth checking exactly how each element of your package will be taxed before agreeing.