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Settlement Agreements Explained

What is Settlement Agreement?

A settlement agreement is a legally binding contract that waives an individual's rights to make a claim covered by the agreement to an employment tribunal or court. In a bit more detail this means that a settlement agreement is a voluntary contract, typically including a form of payment to the employee and explains the mutually agreed terms set out to terminate the employees contract. A settlement agreement can be used when an employee is being made redundant, there is long-term sickness, personal disagreements, dispute over pay or holiday or if there is a workplace grievance. ACAS have some further guidance at

What is the benefit of a settlement agreement?

Just because you’re signing a document agreeing to the termination of your employment, doesn’t mean that you have to suffer. There are benefits to the employee and the settlement agreement does have to be fair, remember it is voluntary. The immediate benefit to the agreement is the certainty it provides, having a document that outlines the terms of the settlement means that there is no misunderstanding or confusion further down the road. As well as receiving a tax efficient payment, the employee can also negotiate to receive a job reference from the employer to ensure that once the employee has moved on the employer can’t impact their future negatively.

The settlement only becomes legally binding once the employee has sought out independent advice on the agreement from a solicitor. Once the solicitor has reviewed the agreement, walked the employee through the details and is happy with the terms, they will state their confirmation alongside the agreement.

Because the settlement agreement avoids the employment tribunal the employee and employer are saved from the costs and time of the tribunal proceedings. The outcome of any court proceedings are uncertain and the expenses and amount of time taken to come to a conclusion can become a big deterrent.

Settlement Agreement Advice

Getting advice is always a good idea, especially when it comes to legal matters and your future. Normally an employer will pay for the cost of the employee seeking legal advice, ensuring that the agreement is fair and ultimately makes sense. Not only can a solicitor make sure the agreement is fair and to a legal standard but they may be able to get you a better deal.

So you get free legal advice and potentially a better deal too? Doesn’t sound too bad now does it?

So if you’re faced with a settlement agreement remember that you don’t have to sign it immediately, the terms are negotiable and you get legal advice that typically will be paid by your employer. In addition to this you can receive a reference that’ll help you find a new job.

Help with Settlement Agreements

If you’ve received a settlement agreement, you will need to make sure that you receive legal advice. Quality Solicitors Barwells has the experience and can offer you a high quality consultation, so contact us today on:

Tel: 01323 899331


Visit us at the office; open Monday to Friday, 09:00 to 17:15 or use the contact form on the website.

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