Legal advice for your settlement agreement

A settlement agreement (previously known as a compromise agreement) provides an employee with compensation for losing their job, and in return the employee agrees not to pursue a legal claim against the employer.

Alternatively, a settlement agreement could be entered into where an employee is still employed by the company but both the employee and employer wish to settle a dispute that has arisen.

What does a settlement agreement generally cover?

A settlement agreement will usually cover issues, such as settling all current and future legal claims and payment of any money owed to the employee. Such claims are likely to include:

A settlement agreement which satisfies the needs of both the employee and employer can be in the interests of both parties, as it provides the employer with the comfort that they will not face any claim and the employee with a financial settlement which should help them to move on with their life and career.

A settlement agreement is a legally binding contract, and requires a person to obtain specialist legal advice on the terms and effects of it before signing.

Settlement agreement advice

To be legally binding, a settlement agreement must:

  • Be in writing;
  • Relate to the employee’s particular complaint or legal proceedings;
  • Record that the statutory conditions for a settlement agreement have been met; and
  • Confirm that the employee has had legal advice from an independent adviser and identify the independent adviser.

In the majority of cases, a person’s employer or former employer will pay a proportion of their legal costs in receiving advice regarding the settlement agreement.

Settlement agreements FAQs

Below, we have answered some frequently asked questions in relation to settlement agreements.

  • Do I have to accept the settlement agreement offer?

    If you are not happy with the terms on offer or wish to continue your employment in any event, there is no obligation on you to sign the settlement agreement. You may feel that you have been given an unreasonable ultimatum or are being pressured in to signing the settlement agreement. The way that your employer conducts itself in the way it presents the offer and options available to you, should not result in you being subjected to undue pressure or improper behaviour.

    If negotiations are unsuccessful and you do not sign the agreement, you may or may not have grounds to bring a claim against your employer in an Employment Tribunal. It is important to remember that there is a strict time limit of three months less one day from the date of termination/last act of discrimination to do this, and any ‘off the record’ discussions regarding the agreement usually cannot be referred to in the legal proceedings.

  • Do I need a solicitor?

    In order for the settlement agreement to be legally binding on both parties, you must obtain independent legal advice on the contents. At Nelsons, we will:

    • Ensure that you understand what you are signing;
    • Check that the document is appropriate in conjunction with your instructions; and
    • Where requested, work with you to secure the best possible outcome.

    It is important that you understand the legal effects of the settlement agreement and the impact on your employment and finances, as once you have signed it you cannot change your mind.

  • Do I need a face to face appointment to complete the paperwork?

    We regularly advise clients on a range of issues remotely and assisting with settlement agreements is no different.

    As long as you are able to provide us with the necessary paperwork we require and have access to a telephone and email, we can advise you on the terms and effect of the settlement agreement without the need for a face to face appointment.  

  • What will it cost?

    Your employer is likely to offer to contribute towards some or all of your fees in obtaining legal advice on the document. They usually offer a fixed sum, which will often be sufficient to cover advice on a straightforward settlement agreement, where you are happy with the terms of the offer.

    Where you require our assistance in improving the terms of the settlement agreement, or if the matter becomes contentious to the point where it looks like your fees will exceed the contribution on offer, we will seek to negotiate this figure up. If we consider it likely that there will be a balance payable by you we will discuss this with you in advance.

How we can help

If your employer has offered you a settlement agreement, you should take advice from our experienced employment law solicitors who can advise and help you negotiate the terms of your agreement.

At Nelsons, our team of specialist settlement agreement solicitors can act as independent advisers for your settlement agreement. This means we are qualified solicitors with appropriate indemnity insurance in relation to providing that advice.

Our team are also very experienced in advising senior executives on negotiating exit packages.

To discuss how our specialist employment law solicitors can help you with a settlement agreement, please call 0800 024 1976 or contact us via our online enquiry form. If you wish to negotiate settlement terms that have been offered to you, we offer a fixed fee one hour appointment which is charged at £200 + VAT.

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