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Introduction to this document

Ex gratia termination payment receipt

Our ex gratia termination payment receipt not only asks the employee to confirm receipt of an ex gratia payment but it also enables you to reach a full and final settlement on their contractual claims related to their employment or its termination. However, be aware that it doesn’t enable you to contract out of their statutory employment law rights - in this case, you need a formal settlement agreement.

Ex gratia

An ex gratia payment is one that you pay to the employee without a legal obligation to do so, usually on termination of their employment. It’s effectively a goodwill payment normally paid as compensation for loss of the employee’s employment. In many cases, the payment is made to keep the employee on side to minimise the risk of them later issuing employment tribunal proceedings against you. Where you do make a genuinely ex gratia payment, it’s always worth asking the employee to sign an acknowledgement confirming receipt of the payment and establishing the basis upon which it is made. Our Ex Gratia Termination Payment Receipt asks the employee to acknowledge they have no claims against you arising from their employment or its termination, and that they accept the monies in full and final settlement of any possible claim. It also goes on to require the employee to accept the ex gratia payment on the clear understanding that they won’t later issue legal proceedings against you in relation to their employment or its termination, whether in the employment tribunal or the civil courts.

A proper settlement

If tribunal proceedings haven’t yet been issued, be aware that a formal settlement agreement or an Acas-conciliated settlement are the only ways you can legally get the employee to contract out of their statutory employment law rights, such as the right to claim unfair dismissal, equal pay, a redundancy payment or unlawful discrimination. A simple “full and final settlement” waiver won’t work, so our receipt doesn’t have the effect of preventing the employee bringing, say, an unfair dismissal claim against you in the future, even though it asks the employee to confirm they won’t. However, where our receipt will work is to ensure the employee can’t bring any purely contractual claims against you relating to their employment or its termination, for example, a claim in respect of unpaid commission or bonuses. In addition, our receipt also serves to clarify the position in the mind of the employee and is a statement of their view of the situation at the time. As such, it could potentially be relied upon later as evidence in any employment tribunal proceedings. So in those cases where you don’t want to ask an employee to enter into a settlement agreement (for example, you perceive that the risk of a claim is low or you’re sure that you’ve followed all appropriate dismissal procedures), you could instead opt to use our receipt in relation to the making of an ex gratia payment, as long as you’re fully aware of the extent of its legal validity.