settlement agreement


Formerly known as a compromise agreement, settlement agreements are used to bring employment to an end on mutually agreed terms. They often involve payment of ‘compensation’ by the employer, on the basis that the employee won’t bring any claims against them.

The agreement is a way to draw a line under everything that has gone before and for the employee and employer to move on.

Negotiating a settlement agreement can be a trying process for both the employer and employee, which is why we’ve put together our top five tips to remember:

1. Get good legal advice. Without independent legal advice the agreement will not be binding.

2. The payment the employee receives may be subject to tax. Normally the first £30,000 is tax free.

3. Don’t tell everyone about the agreement. It is almost always a term of the agreement that no party will discuss that it even exists, let alone the terms themselves.

4. If you believe you have a claim against your employer/employee, really think before you sign, as there is no going back.

5. Employers often pay for, or contribute to, the costs of your legal advice, so there may be no cost to you.

For advice on settlement agreements or any employment matter, contact Laura Franklin on 01782 205000 or or for unlimited access to our expert employment lawyers, find out more about our Your HR service.