Settlement Agreements

square icon - settlement agreements What is a Settlement Agreement?

A Settlement Agreement (or Compromise Agreement as they used to be called) is a legally binding contract between you and your employer, usually used to settle a claim or a dispute or even a friendly parting of the ways, but more often used in a redundancy situation, where an employer pays a sum of money to the employee in exchange for the employee waiving their rights to sue the employer. The employee usually receives a lump sum payment of which some or all is tax free, and an agreed reference as part of the settlement.

square icon - settlement agreement solicitors When are they offered?

They are offered in order to avoid potential claims against employers arising out of redundancy, grievance, unfair or constructive dismissal situations, or threatened Tribunal proceedings. They are increasingly used in redundancy situations to avoid lengthy and expensive consultation, especially where more than 20 jobs are at risk or when the employer offers a financial package over and above what the employee would normally be entitled to in law.

Photo of a person signing a settlement agreement - Andrew Egan Associates

Sometimes, your employer may offer you a settlement as an alternative to facing a disciplinary hearing or investigation or to avoid having to go through a grievance process with you. Your employer may be unhappy with your work performance or attendance record, and decide to offer you a settlement rather than go through a lengthy performance management or absence management process with you.

Your employer may wish to help you towards early retirement as part of such an offer. Sometimes the working relationship breaks down and both parties may prefer an amicable parting on good terms.

The Employee may initate a discussion about an agreement and the offer does not always have to come from the employer. When and how to ask for a negotiated exit takes experience and skill. We can explain your options and negotiate the best deal possible for you.

square icon - settlement agreement solicitors What are the benefits of a Settlement Agreement?

  • You will receive a lump sum – up to £30,000 could be tax-free
  • An agreed job reference and possibly also announcements to third parties
  • The terms are confidential
  • You avoid the risk, expense, stress and delays of having to pursue your case in an Employment Tribunal
  • It offers a clean break for both parties with no admissions of liability
  • Your employer has the guarantee that you will not take them to an Employment Tribunal

square icon - settlement agreement solicitors Why do I need advice from a solicitor?

It is a legal requirement for the employee to obtain independent legal advice before agreeing to waive their employment rights against the employer. Once you sign the Agreement there is no going back to negotiate for more, so you need advice about the terms of the Agreement and how they affect your employment rights.

It is therefore very important that you get advice from an expert who knows what claims for compensation you may have and how valuable they are, so you can make an informed decision about whether to accept the employer’s settlement offer.

square icon - settlement agreement solicitors I have been made an offer. Should I accept?

It depends on the amount and terms of the offer, the strength of any claim you might otherwise have against your employer and what you might win if you take your complaint to an Employment Tribunal. We will assess your case and give you easy to understand advice on what your options are and whether the offer should be improved upon. We will discuss with you what you want out of the Agreement and build it into our advice as part of the service. This might include:

  • Agreeing a reasonable job reference to help you get a job
  • Making sure all the payments, monies and benefits you are entitled to are covered in the Agreement – your salary, accrued holidays, bonuses, commission payments, shares, SAYE, private health cover, company car or car allowance, because the terms offered are in ‘full and final settlement’ of any claims you have or might have
  • The terms of any announcement to your team and co-workers, your clients and customers etc. We can negotiate on internal or external announcements to colleagues and customers. If there is no announcement, what will your customers assume is the reason for you leaving?
  • What about tax? There may be scope to change the clauses dealing with the taxability of certain payments
  • If your employment contract includes post-termination restrictions which make it difficult for you to work in the same industry or for a competitor, we can try to get the restrictions reduced or waived
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square icon - settlement agreement solicitors What do I do next if I am happy with the employer’s offer?

Call us any time or use the online form here. We will go through the Agreement with you in person, by video call or by telephone, check the Agreement and make sure you are getting everything you are entitled to by law. Getting the Agreement signed and returned is usually urgent, so we make it a priority to help you with this.

square icon - settlement agreement solicitors What should I do if I am not happy with my employer’s offer?

We will advise you on the terms and how reasonable the offer is and do our best to get you a better offer. The stronger your claim, the more likely it is that your employer will negotiate and increase their offer. Only you can decide whether or not to accept the offer, but with expert advice you can make a fully informed decision and know exactly where you stand and what to do. We can negotiate on your behalf if you would like us to.

square icon - settlement agreement solicitors Who pays my legal costs for getting the advice?

It is normal for your employer to make a contribution towards your legal costs for taking advice on your Agreement. The amount can vary but you should not have to pay anything, so we always try and limit our costs to your employer’s contribution. If it takes more of our time to get you a better deal than your employer is prepared to offer you, then you may be asked to pay the difference in costs unless your employer is prepared to increase their contribution to your legal costs.

square icon - settlement agreement solicitors What do I do now?

Our employment law specialist based in our Newbury office will be happy to discuss your case with you. You can call or email us using our contact details below, or if you'd prefer use our contact form. We will be happy to discuss your options and guide you through the process.

Initial no obligation consultation. Hourly rate basis, no hidden extras. Call us today on 01635 890560 or Email Us