Settlement Agreements

If you have been offered a Settlement Agreement we can advise you and help you decide if accepting the Agreement is the best thing for you.

What is a Settlement Agreement?

A Settlement Agreement is a legally binding agreement between you and your employer. Ordinarily, it ends your employment on agreed terms.

What are the normal terms of a Settlement Agreement?

A Settlement Agreement is normally a lengthy document that should set out clearly what is being agreed by the employer and employee.

Often the main thing that is being agreed in a Settlement Agreement is a payment of money to the employee, in exchange for the employee agreeing not to bring certain employment related claims against the employer. A Settlement Agreement’s aim is normally to bring about a ‘clean break’ between the employer and employee.

Is Payment in a Settlement Agreement Tax Free?

Legislation allows for a tax-free payment of up to £30,000 to be paid by the Employer to the Employer.

What happens to notice pay in a Settlement Agreement?

The Settlement Agreement will set out the date the employee’s employment will come to an end. If the employee is contractually entitled to notice beyond that date the Settlement Agreement should confirm the amount of notice pay that is included in the Settlement Agreement. As this is a contractual benefit of the employment contract this payment is taxable in the ordinary way that earnings would be taxed.

How quickly can you help me?

We are used to Settlement Agreements having to be agreed with the upmost urgency. We ordinarily will be able to review and provide initial advice within 24 hours.

How much will legal advice cost me?

It should cost you nothing. In nearly all circumstances the employer should provide cover for the legal expenses incurred by the employee in taking legal advice on the terms of the Settlement Agreement.

Do I have to take legal advice?

Yes. For the Settlement Agreement to be binding you need to take independent legal advice. This ensures the employer cannot place undue influence on an employee and that the employee takes proper advice to ensure the Agreement is right for them.

How much should I be paid under a Settlement Agreement?

This very much depends on each employee’s individual circumstances. Key factors might be the circumstances of the employment coming to an end, their current earnings, length of service, age and likelihood of finding alternative employment.

Mark Rothman LLB (Hons)


01702 348384