Settlement Agreement Solicitors

Settlement agreements are often used as an alternative to formal processes such as redundancy, performance management or disciplinary proceedings. They can also be used to resolve an existing dispute or settle a potential  tribunal claim. Where a clean break is in both parties’ interests, a settlement agreement is often the most practical solution.

A well-drafted settlement agreement should cover the financial payment, notice period, any bonus or share entitlements, confidentiality obligations, a reference clause and the waiver of specific claims. Getting the drafting right is critical as an agreement that fails to properly waive the right claims can leave your business exposed.

Redundancy is a formal legal process with specific statutory requirements that employers must follow. A settlement agreement by contrast , is a contractual arrangement that can be used either alongside a redundancy process or as an alternative way of bringing employment to an end.

Under a settlement agreement, the employee agrees to waive their right to bring employment tribunal claims in return for an agreed financial payment, with the terms negotiated between both parties.

There is no fixed formula. The right figure depends on the circumstances, the strength of any potential claims the employee may have, their notice entitlement and any additional payments such as bonuses. Our employment solicitors can assess your position and advise on a reasonable offer before negotiations begin.

The first £30,000 of a genuine compensation payment can usually be paid free of income tax and National Insurance. Payments that are contractual, such as notice pay are taxable. Getting the structure right matters and we advise on this as part of our settlement agreement service.

Most settlement agreements are concluded within two to four weeks. ACAS guidance states that employees should be given a minimum of 10 calendar days to consider the offer and take independent legal advice. Straightforward cases can move faster where both parties are in agreement.

A protected conversation allows an employer to have an off-the-record discussion with an employee about the possibility of ending their employment. In most cases, the conversation cannot be referred to in any subsequent ordinary unfair dismissal claim.

However, this protection is limited. It does not apply to claims such as discrimination or whistleblowing and it can be lost if the conversation is handled improperly. For that reason, it is often advisable to seek legal advice before starting these discussions.

Yes. An employee is under no obligation to accept a settlement agreement. If they choose not to proceed, the employer may need  to continue  with the relevant process such as redundancy, performance management or a disciplinary action. Our solicitors can advise on the most appropriate next steps if discussions do not lead to an agreement.

Legally, the employee must obtain independent legal advice before signing a settlement agreement but there is no equivalent requirement for employers. In practice, , however, it is strongly advisable for employers to instruct an experienced employment solicitor to prepare the agreement. Poorly drafted agreements may not provide the intended protection, particularly where issues such as restrictive covenants, bonus arrangements or potential particularly where restrictive covenants, bonus arrangements or potential discrimination claims  arise.