What is a Settlement Agreement?

A Settlement Agreement (previously called a Compromise Agreement) is a legally binding contract, often used to settle potential claims you may have against your employer, or simply to bring your employment to an end on mutually agreeable terms.

It will typically involve you agreeing not to bring any Tribunal or other court claims against your employer in exchange for an agreed sum of money and/or an agreed reference or benefits. A Settlement Agreement can also be used where employment is ongoing but both parties want to settle a dispute which has arisen between them.

How can Machins Solicitors LLP help me?

As you are likely to be required to waive your valuable employment rights to bring a claim against your employer, a Settlement Agreement will only be legally binding if you have taken independent legal advice on its terms and effect. This is why it is important that you are properly advised before you enter into a Settlement Agreement.

The Employment team at Machins are approachable and experienced. We provide comprehensive employment advice at all levels of seniority in a range of different industries. We can answer questions you might have on the agreement, for example:

  • Am I entitled to a reference?
  • Can I tell anyone about the Settlement Agreement?
  • How long does the process take?
  • What are my rights if my employer doesn’t comply with the Agreement?
  • What claims may I have if I don’t sign the Agreement?

We will ensure you are properly advised about your legal position and how entering into the Agreement will affect your employment rights. Our priority will be ensuring that you are adequately protected under the terms of the Agreement, while receiving fair and sufficient compensation for your loss of employment and the surrendering of your employment rights.

Frequently Asked Questions

I have been asked to accept a settlement agreement by my employer, what are my options?

There are a number of situations where an employer may offer an employee a settlement agreement for example to agree an employee’s departure from the organisation where there are serious disciplinary or performance issues or to resolve a grievance. Alternatively, your employer may offer an employee a settlement agreement because their role is redundant and they are being offered an enhanced redundancy package. Your employer cannot force you to sign a settlement agreement. It is your choice whether you wish to agree to the terms or not. As part of agreeing a settlement with your employer, you must take independent advice on the terms and effect of the agreement. Machins would be happy to advise you on your options.

Can I ask for a settlement offer to be increased?

You can ask for the offer to be increased if you wish. Your employer does not however have to agree to increase the offer.

What happens if I can’t agree terms with my employer?

If you cannot agree terms with your employer will likely withdraw the offer of a settlement altogether and you and your employer will continue as if no offer was ever made. As settlement agreement negotiations are normally confidential /“without prejudice”, you cannot refer to them later in an employment tribunal.

Can I suggest a settlement agreement?

Yes, if you have a dispute or grievance with your employer and/or you wish to leave the organisation you can suggest that you would be willing to sign a settlement agreement. If you wish to do this, you should make it clear to your employer that your offer is off the record. Generally, you should do this by saying that your offer is “Without Prejudice”.

Do I have to take legal advice on the agreement?

It’s a legal requirement that the employee receives independent legal advice on the terms and effect of the settlement agreement and its effect on the employee’s ability to pursue their claims before an employment tribunal.

What will it cost me?

It is usual for the employer to make a fixed contribution towards the employee’s legal costs under the settlement agreement so that you can take advice on the terms and effect of the settlement agreement. In straightforward cases, the employer’s contribution will cover our fees in full and there will be no additional charge to you.

Does my employer have to cover all my legal costs in obtaining advice about my settlement agreement?

Your employer does not have to agree to cover all of your costs but you can request this particularly if the agreement needs substantial amendments to its drafting. However, your employer is unlikely to agree to cover the costs of your lawyer negotiating the settlement amount on your behalf.

Related News & Insights (View more)

Get in touch with us

Our experienced solicitors are on hand to give you advice and assistance.

Call our team on 01582 514000 or Contact Us and we'll get back to you as soon as we can.

Get in touch with us

One of our highly experienced team will be in touch with you shortly.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Request a callback

One of our highly experienced team will be in touch with you shortly.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.