Settlement Agreements

Kingsley Smith Solicitors are experts in settlement agreements. We use our experience to help both employers and employees to fully understand settlement agreements and how they can effectively meet their needs.  

By seeking legal advice when issuing or accepting a settlement agreement you can be sure your interests are protected. At Kingsley Smith Solicitors, we will work in an efficient and confidential manner to get the best outcome possible for you.

I am an employee

I am an employer

What is a Settlement Agreement?

A settlement agreement in employment cases) is a legally binding agreement usually offered to the employee shortly before or after termination of employment. They were previously called ‘compromise agreements’, being renamed on 29th July 2013.

Why are Settlement Agreements used? 

In the majority of circumstances, settlement agreements are issued to employees when they are being made redundant.  In other cases, they are issued where both parties reach a mutual agreement to end the contract of employment. They are also issued in several other circumstances, which do not involve ending the employment relationship. This includes resolving on-going disputes such as over holiday pay, overtime etc.

The outcome of a settlement agreement is that an employee agrees not to pursue legal claims, such as unfair dismissal and workplace discrimination, in return for an agreed sum of compensation. This agreed payment is in addition to those that the employee would normally have a legal right to, for example their standard holiday pay or notice pay.  This allows for a clean break in the employment relationship or allows the relationship to continue with no outstanding grievances.

Standard clauses, which are normally covered, include:

-       the claims either party has against each other, which are to be settled

-       the payments to be received

-       which payments may be effected by tax

-       confidentiality clauses

-       employer references



As an employee, have you been served a settlement agreement? Perhaps you are unsure whether you should sign the agreement? Is it fair?  Is the agreement clear? Should you ask for more compensation? We can work with you to answer these questions. 

A settlement agreement may also provide the answer to an issue you face at work.

Settlement agreement advice for Employees

Never sign a settlement agreement without legal advice. If you’ve been given a settlement agreement at work, your employer must ensure you receive legal advice. If they fail to do this, the document will not be enforceable.  If your employer has not offered this option, then be certain to raise this with them. Your employer would normally pay a contribution towards the costs of this legal advice, as it is in their interest to do so.  

Our employment law specialist will advise on the terms and conditions of a proposed agreement but then go a step further to determine if you should have been issued with a settlement agreement in the first place.

We look at the procedure that led to the termination of the contract and see if you have a chance to take your case to a tribunal instead. You may feel forced into a settlement agreement, if for example, you think you have experienced constructive or unfair dismissal. 

It is recommended to gather as much background information as you can. If this provides a strong basis for going to tribunal, we would weigh the potential award that may be made by the tribunal against the offer made to you by your employer. If the difference is significant, we will discuss with you the possibility of taking matters to a tribunal and/or attempt to negotiate an increased offer.

At Kingsley Smith Solicitors, we will always listen to and address your concerns about the process, as well as explaining any legal jargon.

Settlement agreement reference

Before the settlement agreement is signed, you must consider what happens after you leave, if indeed the end result will be employment termination. You should always ask for a reference to be included within the settlement agreement. In its most basic form it can serve as written proof that you’ve held your specific position at the company between the dates you say you have. Ideally it would include a performance review and employment recommendation. This will be necessary when you apply for jobs in the future. Without it you may struggle to find one.

We will give advice on obtaining references before you sign the agreement as well as advising you on the pre and post termination negotiations you may need to have with your employer.

Settlement agreement negotiations on behalf of the employee

 At Kingsley Smith Solicitors, we have years of experience negotiating settlement agreements on behalf of employees. We critically evaluate the agreement and advise on whether we think you may be able to achieve a more beneficial conclusion to the employment relationship.

We can also judge if your agreement is fair or not. We will draw your attention to the rights you waive by signing the agreement, so you are clear of your situation post agreement.

Practicalities and process

The process is a straightforward one and starts with your employer or their solicitor forwarding a draft settlement agreement to you or (by agreement) direct to us for consideration.  All discussions and correspondence will be held on a “without prejudice subject to contract” basis i.e. nothing is legally binding until the agreement is signed by both parties.

This follows a discussion between you and your employer when the matter of a settlement agreement is raised. Your employer may have recommended a lawyer but you are under no obligation to use the one they suggest. The lawyer must be independent from the lawyer that your employer has used to draw up and advise on the settlement agreement.

Negotiations will start between you and your employer so you are both happy with the terms. Kingsley Smith Solicitors will handle this process in order to reach the best compromise. A settlement agreement will contain a timetable of payments, indicating what payments will be made when and how much salary you will receive up to a specific date.

You may wonder what you should do whilst the agreement is being negotiated. Should you go to work in the interim?

Based on your situation, we can advise on the best course of action. In most cases, if the relationship with your employer is manageable, we would advise you to work your notice. If the relationship has broken down too much by this stage, your employer may recommend that you go on garden leave until the agreement is completed. This means that you must stay away from work but will remain on the payroll. This will most likely be decided at a pre-negotiation discussion.

Once you and your employer have reached an agreement regarding the terms of the settlement, and you’re happy to sign it, we will sign the agreement too, as an independent adviser. It is then sent on to your employer and their lawyer to sign. If both you and your employer are in agreement about the contents of the settlement, the entire process can be short, in some cases taking two weeks to resolve.

During the process, we offer face to face or telephone consultations. Our employment lawyer will give straightforward, honest advice. We aim to ease the stress and worry of what can be a difficult situation. We will work hard to achieve the best outcome possible.

To find out more about how we can help you negotiate settlement agreements call our employment law specialist on 01634 811118, email or fill out our enquiry form.



Are you an employer looking to protect your interests when parting company with an employee? What terms should the agreement state? What compensation should you expect to pay? How do you approach this difficult situation with an employee? We can work with you to answer these questions.

Settlement Agreement advice for Employers

Having a settlement agreement in place between you and an employee means that you can achieve a clean, effective and quick break in the employment relationship or resolve a complicated issue of contention.  

When should you use a settlement agreement?

  • You may have already agreed terms with your employee and would like advice on how to set this out in writing.
  • If an employee comes to you with a grievance issue that you do not wish to uphold which results in the employer/employee’s relationship becoming untenable, a settlement agreement is a good solution. We can give you advice on the settlement terms and a suitable severance pay amount before you issue an agreement to the employee.  

We’ll advise you of the confidentiality clauses you need to include to protect yourself during and after the settlement process.

What are protected conversations? 

Conversations you have before the agreement is signed are called ‘protected conversations’ ensuring that what you discuss is confidential and cannot be used against you in an unfair dismissal claim. However, anything discussed can still be used in any other type of claim such as discrimination.  

Settlement agreement negotiations on behalf of the employer

We can advise you on the implications of offering a settlement agreement.

You cannot be seen to be pushing an employee towards a settlement agreement as they could use this against you in an unfair dismissal case.

Important points to consider during the negotiations:

  • Conversations around the settlement agreement and those preceding it could be used in an employment tribunal.
  • You must always allow your employee 10 calendar days to consider the agreement.
  • You must offer your employee legal help, as they are required by law to have legal advice regarding the settlement agreement. You will be expected to contribute financially towards this.

Settlement agreement payment

If you are working towards parting company with an employee, it is important to seek legal advice at the earliest possible stage. We understand that remaining professional throughout the process is crucial. Our advice and guidance will help, as well as ensuring an efficient and positive outcome.  

 We will ensure the payment amount is fair and not over-inflated by the employee’s solicitor. You are entitled to withdraw the settlement agreement, if you feel the sum requested is too much.

Practicalities and process

We understand you may have experience with this sort of agreement and could already have a draft document prepared when you seek our help. However, if you are embarking on this process for the first time, we’ll guide you through it step by step.

We will manage the drafting of the settlement agreement, to enable it to meet the needs of the specific situation. We can advise you on the right sum to offer your employee based on the circumstances surrounding the termination, the terms of the employee’s contract and any potential claims from the employee. We’ll ensure you know your rights and obligations throughout the process.

The first stage of the process involves a discussion between you and your employee, in which you consider payment amounts and claims to be settled. Kingsley Smith Solicitors will support you through this phase, providing script and letter templates if necessary. We will help you remain as diplomatic and professional as possible. By the end of this discussion phase, you should have a spoken agreement of the payments that will be part of the settlement. Remember, these are protected conversations (see above).

We would then formally draw up the settlement agreement and send it to the employee’s lawyer. It’s important that you and your employee use different lawyers, because your employee can only waive their rights to bring an employment claim if they have consulted an independent solicitor.

Negotiations would then begin and continue until both you and your employee agree on the terms within the agreement. Normally an agreement can be reached via email and telephone correspondence. However, in some cases we can arrange a face-to-face meeting with you, your employee and their lawyer in order to resolve the settlement terms.

Our expert will give straightforward advice on how to ensure the issues are dealt with in a confidential manner and how you can ensure there is no negative fall out from the process that reflects badly on your business. We listen to your side of the story and help you to reach an outcome that is fair to you and your business.  

 To find out more about how we can help you with settlement agreements, call our employment lawyer on 01634 811118, email or fill out our enquiry form.

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