What Is A Settlement Agreement?

A Settlement Agreement is a tool to help employers and employees end their employment relationship in a mutually acceptable way. It is a much used agreement as it gives certainty to both employers and employees.

A Settlement Agreement is a legally binding agreement in which an employee gives up any rights to bring an employment claim against an employer usually in return for a tax free compensation payment. There are certain legal formalities which must be complied with if such agreements are to be legally binding and this includes a requirement that the employee must receive independent legal advice on the terms of the agreement before signing. If you want to read the ACAS guide to Settlement Agreements then just click here:

I have previously blogged about Protected Conversations between an employer and employee and a Settlement Agreement is often the end result of such conversations. You can find this blog here:

There is usually a negotiation process where the employer suggests terms to an employee who then seeks legal advice before signing. The solicitor acting for the employee will then advise the employee about the terms of the agreement, and in particular, whether it is in his or her interests to sign. Often the solicitor will be able to negotiate better terms for the employee which will then be incorporated into the final draft of the agreement before both parties sign it.

Settlement Agreements must be carefully drafted on behalf of an employer and an employee must obtain legal advice before signing so should make sure that such advice is obtained from a specialist employment lawyer who can protect his or her interests.

You can read more about Settlement Agreements on our website here:

And always remember - Talk To Chris if you are an employer or employee who needs further information on this topic or any employment related problem.