Why didn’t I get a bigger pay-out? Getting Executive Service Agreements to reflect the actual deal.  


You wouldn’t dream of buying a house without using a solicitor – so why would you sign a six figure salary contract  without taking proper advice? At TandonHildebrand we were recently discussing how many highly paid professionals and executives who are not taking legal advice on signing their service agreements – but who then end up having to seek help on termination in unnecessarily protracted and expensive negotiations.  

“It is always a good idea to seek legal advice before entering into a binding agreement. Many employers today recognize this and are often willing to contribute to the cost. Still, people tend to try to stay away from lawyers where they are able, to avoid the  perceived high cost and over-complication of what they wish to be positive beginnings. They may also be unaware of how little legal protection they actually  have ,” says Tania Tandon.   

Many don’t realise that the actual terms in their contracts are not always reflecting what was discussed in negotiations, and that  email correspondence or any documents shared before  may not be legally binding after the agreement has been signed. Often the deal reached between the new hire and the executive leading the recruitment has many parts to it and has arisen from lengthy negotiations. If the deal reached is not documented accurately, there is scope for either party to suggest it was different, either because relations have broken down, because the environment has changed or the company decision maker is  different from when the recruitment process took place and unaware of the context.  

“The worst case for the executive would be that through no fault of theirs, upon termination they lose actual and potential equity, any bonuses earned, as well as their employment. The worst case for the company is that they end up having to pay a departing underperforming or misbehaving executive for equity, an unearned bonus and a large payment in lieu of notice,” says Tania.  

For the company, a disgruntled leaver and a drawn out severance process can also prove a threat to business interests and be bad for PR, as well as for retention and future talent acquisition. In other words, both parties would benefit from the deal being clear at the point of signing.   

For advice on of what to consider before signing a Service Agreement, check out our Basic Checklist. 


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