Settlement agreements

What should I do if a settlement agreement has been offered to me?

Settlement agreements were previously called compromise agreements. They are an agreement between an employer and an employee. When a settlement agreement is signed by an employee, it is agreed that he or she will not take the employer to court for a monetary amount. Employees have rights including those against discrimination on protected grounds and a right not to be unfairly dismissed. You are unable to sign these rights away without initially taking some independent legal advice; to accept a settlement agreement, you require legal counsel.

Note that the parties can speak freely in negotiations without fear of anything said being used in evidence against them should the negotiations break down. Moreover, neither party is legally bound by anything “agreed” in the negotiations until a final written agreement is actually signed.

At Employment Lawyer in London, we will clearly explain your rights and be very forthright in ensuring that you protect them.

Am I able to receive a larger compensation amount?

The amount of compensation that an employer is prepared to pay is the most important feature of a settlement agreement. With previous experience of employment tribunals, we will immediately be able to tell you whether you should have a higher award. We negotiate generous awards for our clients and have the expertise in our employment team to escalate a claim to the employment tribunal.

Is my Settlement Agreement taxable?

There is a possibility that under a settlement agreement, the first £30,000 of the settlement payment could be paid tax-free. When you are agreeing settlement terms, this is a substantial bonus.

Full & Final Settlement:

You sign away your right to go ahead with employment tribunal proceedings against your employer, when you sign a settlement agreement. The employer will typically expect you to agree to and sign an all-encompassing waiver which will cover all potential claims.

Restrictive Covenants & Post-Termination Restrictions:

Any post-termination restrictions laid out in your contract of employment that look to prevent you from being employed by a competitor, soliciting or dealing with any of your former clients, or poaching employees of the business, are enforceable only if your contract of employment is not breached at the time you were dismissed.


If your employment is being terminated, you will be looking to find another job and you will need an employer reference as this is a critical part of securing other employment. When you are in negotiations of a settlement agreement, you are able to agree to the reference content that your employer will be sending onto possible future employers.

Who will pay the legal fees?

Our legal costs will be paid by your employer. For a valid settlement agreement, you are required to take independent employment legal advice prior to signing the agreement. In the majority of cases, an employer wants the certainty that it is a legally enforceable agreement to prevent you taking any further action in an employment tribunal. There is subsequently no charge to you!

If an offer of a Settlement Agreement has been made, contact us on 020 8579 1345 for the advice you need.

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