A settlement agreement (previously known as a compromise agreement) is a legally binding contract or agreement between an employer and the employee that settles specified claims that the employee might have against their employer. It usually provides for a financial payment to be made to the employee and/or an agreed reference in return for the employee agreeing not to pursue claims against the employer.
Sometimes settlement agreements are also used when both parties need to settle a dispute but the employee doesn’t necessarily leave their job. Once a settlement agreement has been signed you will not be able to pursue any claims against your employer, so it is crucial that you understand all the implications of the agreement.
Our specialist employment lawyers regularly advise on settlement agreements and act as the adviser referred to in the agreement. We will be able to advise you on the settlement agreement and make sure you are being properly compensated.
Your employer will make a contribution towards your legal fees, the details of which will be set out in the settlement agreement.
For information on how we can help employers with settlement agreements, please see our Settlement Agreements for Employers page.
To be legally enforceable you must have received independent legal advice on the terms and effect upon you of those terms. You have to receive this advice before signing the agreement.
An employer normally pays a contribution towards an employee’s legal fees for obtaining advice on the terms and effect on you of the agreement. This contribution is normally around £350 – £500 plus VAT.
Yes. You may want to do this before seeking legal advice on the agreement or we can help you with negotiations.
No, they are entirely voluntary. You have a choice whether to enter into the settlement agreement or not. You should be given a reasonable period to consider the terms offered and take legal advice. What is reasonable depends on the circumstances. Acas do recommend a minimum of 10 calendar days (a specific requirement for pre-termination negotiations under s111A Employment Rights Act 1996), unless agreed otherwise.
