Settlement Agreement – Employee

Settlement Agreement – Employee

What Is A Settlement Agreement?

A Settlement Agreement is a legally binding agreement between you and your employer. The basis of the agreement usually reflects a proposal for you to receive a payment, in return for your agreement not to pursue any claims in a Tribunal or a Court. They were previously called Compromise Agreements

Do I Need Legal Advice?

Given the seriousness of waiving your legal rights to bring an employment claim, there is a legal requirement that you obtain advice from a solicitor, certified trade union, or qualified adviser.

Whilst the legal requirement is only to advise on the terms of the agreement, and its effect on your ability to pursue any rights before an employment tribunal, we do more.

We want to ensure that it it is reasonable in your circumstances, and takes into account the impact on your future employment.

We will want to explore any potential claims you may have, sometimes clients are unaware of the seriousness of the actions they have been subjected to.

If you want to read about some of our client’s positive experiences, please read these testimonials.

Why Do Employers Use Settlement Agreements?

It is a method to create a clean break between you both, by way of an agreement, with no opportunity for you to pursue any employment claims.

They are used for various situations. Sometimes to shorten a redundancy process, performance or disciplinary procedure, or where you have potential claims arising from a grievance or termination.

Do I Have To Accept The Offer?

There is no requirement to accept the offer, you ought to receive a reasonable period of time for you to consider whether to do so. ACAS recommends 10 calendar days.

If you are minded to reject the offer, the potential risks or outcome of doing so can be explored with your solicitor.

If your employer threatens you with dismissal, before any form of disciplinary process has begun, should you choose to reject the Settlement Agreement, this constitutes something referred to as ‘improper behaviour’ and can be disclosed to a Tribunal. There are other circumstances in which a Settlement Agreement might be disclosed to a Tribunal, however, often the negotiations are kept ‘off the record’. Depending on the timing of the offer you may hear these negotiations referred to as ‘protected conversations’ or ‘without prejudice’.

What Is A Reasonable Financial Offer?

Payment In Lieu Of Notice

If you are not working all of your notice then you ought to be paid for that period. Depending on your contract, and other circumstances, that payment might reflect your basic salary only or might include all of your benefits such as pension contributions, medical insurance, or car allowance.

Contractual Payments

Your Settlement Agreement ought to reflect other payments you are due such as accrued holiday, bonuses and commission.


A payment of up to £30,000 compensation can be paid without tax being deducted in certain circumstances, it cannot be a contractual payment. We will review your payments to determine whether there is potential tax payable.

We will also advise you as to whether or not:

– taking into account the situation you are facing; and

– your potential claims, and the financial offering,

the offer is reasonable.

This might take into account what you could potentially receive if you were to pursue an Employment Tribunal claim. We undertake a benchmarking exercise so that you understand your position.

The Settlement Agreement will state when payments will be made, this is usually between 14-28 days after signing, or when the next payroll date falls.

Where you decide that the settlement figure is too low, you may choose to negotiate the terms yourself, or instruct your solicitor to do so. You could receive practical advice on raising a grievance of an appeal.

Many agreements are signed at the first meeting, we are here only to ensure you have enough information to decide what is best for you.

Future Employment

With the ending of your employment, we want to ensure you also protect your financial position going forward. This might include:

  • an agreed reference
  • negotiating post termination restrictions
  • agreeing announcements
  • ensuring confidentiality and protecting your reputation.

How Much Will It Cost Me?

Your employer should expect to pay a contribution towards your legal fees, usually between £350 and £500 (plus VAT), depending on the complexity of your matter and finances. This will usually cover your costs in a straight forward matter. If you decide to negotiate, or you decide there is other work you want undertaken, it will be your decision, before any additional costs are incurred.

We look forward to supporting and advising you on your exit, and the terms of your Settlement Agreement.



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