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Settlement Agreements

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Settlement Agreements Solicitors

Settlement agreements used to be called compromise agreements because that’s exactly what they are – a legally binding act of compromise between the employer and employee. Usually, they provide for a severance payment by the employer in exchange for the employee agreeing to not pursue a claim (e.g. for unfair dismissal) in an Employment Tribunal or court.

Why do employers use settlement agreements?

Signing a settlement agreement is often the best and quickest way to terminate an employment contract on terms favourable to the company. It achieves a clean break with no recourse for the employee to take you to a tribunal for more money. Situations, where you may wish to use a settlement agreement, include:

  • You don’t want a full redundancy consultation or performance review before terminating
  • You want to circumvent a claim for unfair dismissal
  • The employee has raised a grievance that you’d like to resolve confidentiality


How do you negotiate a settlement agreement?

A settlement agreement will usually contain the following provisions:

  • Breakdown of payments
  • Notice periods or payments in lieu
  • Provisions regarding pension rights, health insurance and other benefits
  • Tax indemnities from the employee so you’re not making additional tax payments if HMRC challenges the settlement
  • The affirmation of any restrictive covenants
  • Confidentiality clauses
  • Clauses to protect your reputation. e.g. preventing the employee from making derogatory statements against you


Our settlement agreements solicitors can help you negotiate the terms of an agreement, write an agreement, and monitor existing agreements to ensure the terms are still being met for the benefit of your business.

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