Settlement Agreements for Employees

When an employee and their employer part ways due to redundancy, a complaint or a particular grievance, it can often lead to a dispute. As a result, it’s now common for employees in this situation to be offered a settlement agreement by their employer when they leave their jobs early.

What is a settlement agreement?

A settlement agreement is a legal contract which ends the relationship between you and your employer on jointly agreed terms.

As part of this agreement, it is normal for your employer to agree to pay you a sum of money. They may also agree to provide you with a reference for future employment.

In return, under the terms of this agreement, you agree not to pursue an employment tribunal claim against your employer for terminating your employment because of a particular complaint. This could include discrimination, such as sex discrimination, age discrimination or racial discrimination. It can also include bullying in the workplace or another form of unfair treatment during your employment.

For the agreement to be signed, you must receive advice from an independent adviser, such as a specialist employment solicitor.

Blog | What is a settlement agreement?

Our employment law expertise

Barcan+Kirby’s employment lawyers can advise employees going through redundancy or the termination of their contract on any settlement agreement received from their employer.

Our employment solicitors can advise you on the consequences of signing your agreement, as well as explain the meaning of particular clauses to you and negotiate on your behalf with your employer for better terms.

Case study | Settlement agreement negotiation

Settlement agreement FAQs

The ACAS Code of Practice recommends that employees should be given a minimum of 10 calendar days to consider a formal written settlement agreement. This is so that you have time to consider your options, including meeting with a lawyer who can advise you on your legal rights and whether you should negotiate the settlement offer.

In most circumstances, having a settlement agreement does not affect your ability or eligibility to secure employment. In most settlement agreements, your employer will have included a reference to support your search for a new job.

If your settlement agreement contains a clause that prevents you from working in a specific field, e.g. for a competitor, this may hinder your search for a new role. This is known as a restrictive covenant. If your agreement contains this but your original employment contract does not, you should speak to an employment solicitor who can advise you on your rights.

Yes, you can potentially negotiate all aspects of a settlement agreement, for example, the financial payment, the waiver of any post-termination restrictions, and the date that your employment ends. Furthermore, you may be able to have control over your exit, including an announcement to internal colleagues and third parties.

It is the employer’s responsibility to contribute towards the cost of a settlement agreement but there is no requirement for them to cover the entirety of the cost of such advice.

No, except in very exceptional circumstances. Generally, once you sign a settlement agreement, you waive your right to claim against your employer. If you think you have ‘exceptional circumstances’ it is important to instruct an employment law solicitor who can advise you on the process for doing this.

Most settlement agreements contain a confidentiality clause. Most of the time this covers the existence, i.e. the fact you have an agreement at all, as well as the terms within the agreement, e.g. the payment amount.

If the settlement agreement itself has to stay confidential, you must not tell anyone that this is how your employment came to an end. It may be that you can agree with your employer that this confidentiality clause does not apply to immediate family and professional advisers.

If you have a confidentiality clause in your settlement agreement, it is best to seek specialist legal advice so that you know what you can and cannot do.

As a settlement agreement is a legally binding document, any breach will have serious implications.

If an employee breaches the terms of a settlement agreement, the employer may be able to recover some or all of the payments they received at the end of their employment.

If an employer breaches the agreement, the employee can claim for a breach of contract. It is vital to seek legal advice if you believe that your employer has broken the terms of your settlement agreement.

Compensation payments of up to £30,000 may be paid without tax, however, this must be purely compensation and not include any earnings, bonus payment, notice pay or other contractual benefits, e.g. pension contributions or holiday pay.

Our fees

Although it’s common for employers to contribute to the costs of settlement agreements, sometimes they provide a limited budget. Our fixed-fee packages are designed to help you keep the costs of your advice under control. Our packages start from £450 + VAT.

If your employer’s contribution doesn’t quite cover your legal costs, our employment law solicitors can sometimes help you negotiate an increased budget.

Case study | Settlement agreement increased by 40% after negotiation with employer

Get in touch with our settlement agreement solicitors in Bristol and South Gloucestershire

Our employment lawyers work with employees across the UK from our offices in Bedminster, Bishopston, Bristol city centre, Kingswood and Thornbury. To speak to a specialist solicitor, call us on 0117 325 2929 or complete our online contact form.


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