Settlement Agreements

Settlement agreements (formerly called compromise agreements) are legally binding agreements between an employer and employee. Your employer will contribute towards your legal costs in obtaining advice on the terms of the settlement agreement. Therefore, we can offer the vast majority of our clients a completely FREE service. Call now on 01206 766333.

Signing your Settlement Agreement

When signing a settlement agreement, an employee agrees to sign away their rights to bring an Employment Tribunal claim against their employer. This is in return for a cash sum.

Settlement agreements are used for redundancy and working disputes. A settlement agreement can also be used when resolving potential or actual Employment Tribunal Claims. We offer clients an online settlement agreement review service. You need only answer a handful of simple questions. Then one of our Employment Law Team will review your settlement agreement and call you to discuss it. All completely free of charge. Call now on 01206 239757.

What should be included in a settlement agreement?

• Tax‑free compensation (up to £30,000): Once you have submitted your settlement agreement for review, one of our settlement agreement solicitors can advise you on this matter. If they feel you are not receiving enough compensation, your settlement agreement solicitor will recommend negotiating on the compensation. Negotiating settlement agreement compensation very often represents a wise investment, given the legal costs involved are hugely outweighed by the additional compensation received.
• Confidentiality: A confidentiality clause requires both the employee and employer to not disclose matters related to the settlement agreement.
• Pre‑agreed reference: This ensures you are able to receive a reference from your former employer in the future, allowing you to secure future employment elsewhere.
• All termination payments: Your holiday entitlement, any bonus, plus your notice period should be paid as part of your settlement agreement. Our Settlement agreement solicitors will ensure

Settlement Agreement FAQ’s

Do you have to pay our legal fees?

Your employer will usually contribute towards your legal costs in obtaining advice on the terms of the agreement and therefore we can offer the vast majority of our clients a completely FREE service.

How long does the process take?

We are able to advise you on the terms and effect of your settlement agreement within 24 hours.

Will you have to pay tax and national insurance on the compensation payment?

You will have to pay tax and national insurance on wages, holiday pay, notice pay and any other payment that is considered “earnings”.

The first £30,000 of payment of compensation however is generally tax-free. Such payments are usually labelled ‘ex gratia payments’, ‘termination payments’ or ‘compensation payments’. However, there are limited exceptions. Redundancy payments can also be paid tax free.

Can you negotiate the compensation offered?

Negotiating settlement agreement compensation very often represents a wise investment, given the legal costs involved are hugely outweighed by the additional compensation received.

Can you make any claims against your employer after signing the agreement?

Signing a settlement agreement generally prevents you from making or continuing any claim against your employer.

However, there are three exceptions:

• If your employer breaches the settlement agreement – e.g. they fail to pay you the compensation due under the Agreement;
• You should be able to make a personal injury claim for injury you were not aware of at the time you signed the agreement; and
• Claims for accrued pension rights.

Can you tell anyone about the settlement agreement?

There is normally a confidentiality clause in the Agreement. This typically comes in two forms:

• Terms-only: This clause covers only the terms of the agreement. This means you can tell people that you have reached an Agreement with your employer, but you cannot tell them the contents of the agreement (e.g. details on compensation)
• Whole agreement: This means that you cannot even tell people that you have reached an Agreement with your employer. There are limited exceptions included within an Agreement which we will set out in detail for you.

Can you say what you want about your employer?

Settlement agreements often contain a non-derogatory statements clause. This prevents you from bad-mouthing your employer or other employees. If this is in your Agreement, you should be careful what you say about your employer, particularly in public or on any social media site.

When will you receive your payment?

This should be set out and agreed in the agreement. Usually, it is within 30 days of your termination date or on your employer’s next payroll date.

Will you receive a reference?

Employers do not generally have to give you a reference. However, many settlement agreements include an agreed reference or provision for a reference from a prospective employer. If your employer later receives information about you that makes the agreed reference untrue, they may refuse to give one or, if required by law, disclose true but negative information or statements about you.