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Settlement Agreements for Employees

We are a specialist firm of employment law solicitors based in Central London (or Holborn WC1, at Chancery Lane). We are regulated by the Solicitors Regulation Authority and have full professional indemnity insurance. As experienced employment law solicitors we have given advice on Settlement Agreements, redundancy and severance to hundreds of people in order to get the best results for them. Call us today on 0207 118 0950 for a free initial chat.


Common Questions regarding Settlement Agreements

When will Employers offer Settlement Agreements?

Employers will offer Settlement Agreements) in a number of situations, for example:

  • If the employee is being made redundant, and the employer is offering enhanced terms on redundancy (a ‘redundancy agreement’)
  • If the employee has raised potential claims that the employee wants to settle either before or after the issue of proceedings (a ‘Settlement agreement’).
  • If the employee is leaving on good terms, but and the employer wants to make an ex gratia payment (a ‘severance agreement’).


What we will do for you:

If you want us to advise you on the Settlement Agreement you have been offered, one of our specialist employment lawyers will:

  • Advise you on whether any claims arise on the termination of employment. You may for example have a claim for unfair dismissal, harassment, or unpaid holiday or commission. We need to identify any such claims and provide careful advice.
  • If so, advise you what those claims might be worth, which could be significantly more than you are being offered.
  • In the light of that information, advise you whether the sum offered is reasonable in the circumstances. If not, we may need to go back and ask for more money on your behalf.
  • Explain the meaning and effect of the agreement to you and advise you whether anything needs to be amended or changed. Compromise agreements often have complicated clauses it is necessary to go through carefully.
  • Negotiate on your behalf as required. We have often negotiated a bigger settlement for employees than the one originally offered. Even when the money offered is enough, there may be other important points to be agreed, for example the provision of an agreed reference or even the retention of your mobile phone number.


Things we’ll be looking out for:

There are a number of matters we will look at when advising you on the compromise agreement (or redundancy agreement), just some of which are:

  • The offer may look good, but when you take into account the sums the employer has to pay you anyway (including statutory redundancy payments, holiday and notice) it may be rather less generous than you initially suppose. We will analyse the offer for you.
  • It may be possible for some of the payments to be paid in a more tax efficient manner. The first £30,000 can often be paid without deductions as long as it is not paid as part of a contractual benefit.
  • Even when employers make payments without deductions, they will often insert a tax indemnity clause so that you are liable for any tax arising. These clauses need to be considered carefully.
  • The agreement may for example ask you to sign away your rights to exercise share options that could be worth a good deal in themselves.
  • It’s often advisable to get a reference expressly agreed and attached to the compromise agreement.
  • Sometimes there will be a confidentiality clause preventing you from discussing the agreement even with your own spouse or partner.
  • Some employers put in penalty clauses to try and claw back the money if you are in breach of the agreement. Such clauses may not be enforceable.
  • The agreement may impose restrictions on what work you can take up after you leave. Alternatively the post termination restrictions in your employment contract may remain enforceable.


How long will it take?

It may be possible to sign off the agreement on the day we meet. However if we do need to liaise with your employer, either on the wording of the agreement or the amount of money being offered, most agreements will be sorted out within five to ten days.


How much will it cost?

When your employment is coming to an end, you need to be especially careful with money. The good news is that more often than not your employer’s contribution to your legal costs will be enough and you won’t have to pay anything personally. If not many employers will still cover any additional legal costs if things get complicated. In any event we will carefully discuss legal costs with you at every step of the process so that you never get a nasty surprise.


What makes a Settlement Agreement binding?

In order for a settlement agreement to be binding, the following conditions must be satisfied:

    • The compromise agreement must be in writing
    • It must relate to a particular complaint
    • The employee must have received advice from a relevant independent adviser (normally a solicitor) as to the terms and effect of the proposed agreement and in particular its effect on his ability to pursue his rights before an employment tribunal.
    • There must be in force, when the employer gives the advice, a contract of insurance or an indemnity covering the risk of a claim by the employee in respect of loss arising from the advice.
    • The agreement must identify the adviser
    • The agreement must state the conditions regulating compromise agreements under the relevant Act are satisfied.


Is there any chance the employer will withdraw the offer entirely?

This has never happened in our experience. We will always work in a constructive professional manner to close the deal.




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