As a senior executive working in the UK, you can expect to receive a detailed contract (often called a “service agreement”) which sets out the terms of your employment. It is worth noting that, if you are currently based in an “employment at-will” country (such as the US), the terms of your contract might be more comprehensive than those you are used to.
While there are multiple terms that you might wish to negotiate, in our experience the key terms are as below.
- Role. You will want to ensure that the contract properly identifies your role, duties and authority levels to minimise the risk of any future disputes. If you are going to be a member of the company's board or will hold a senior position, be aware that you will be subject to various statutory and fiduciary duties; it is important that you fully understand what these are. You should also ensure that the company has relevant insurance policies in place, such as director and officer insurance.
- Salary and economic terms. These will be
fact-specific and will vary depending on your role and the
organisation. However, you may wish to consider:
- Salary, with agreed increases (or at least the potential for an increase) each year
- Participation in incentive programmes, including short-term bonuses (such as an annual cash bonus) and long-term incentives (such as options or share awards). If possible, it is advisable to ensure that you have a contractual right (as opposed to only a discretionary right) to these participations and that any parameters around your expected performance are made clear from the start.
- Guaranteed payments in certain circumstances. For example, in the event that your employment is terminated without cause (i.e. for something that was not your fault), you will want to ensure that bonuses and other incentives (which might not otherwise be payable) are still paid. On a more general level, consider including a provision allowing for a termination or change of control payment when your employment ends.
- Other benefits. You should ensure that you are being offered standard benefits, such as healthcare, life assurance, car and pension and, if you are relocating, you might negotiate a relocation allowance and assistance with your individual tax affairs.
- Notice periods. In the UK it is common for senior executives to be subject to a notice period of six to twelve months. You might wish to negotiate the longest possible notice period to provide you with job security. You will also want to ensure that the relevant termination provisions are fair. For example, while it is common for UK employers to pay employees in lieu of their notice (i.e. terminate their employment immediately and pay them for their notice period), this is typically limited to base salary only. Ideally, you should expand this to cover other payment rights (such as a bonus) to ensure that you are no worse off.
- Restrictive covenants. It is standard for senior executives to be subject to post-employment restrictions which prohibit them from competing, poaching staff and soliciting clients for a period of time, typically six to twelve months post-employment. Unlike some jurisdictions, UK employers do not need to pay former employees any compensation when relying on these provisions. It is important to try to negotiate a reduction in any such restrictions when agreeing your contract to increase your flexibility when the employment ends.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.