Settlement Agreements

Our specialist employment solicitors are experts in creating legally binding settlement agreements which minimise your legal risk.

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Settlement Agreements

Effective settlement agreements to protect your business against future claims

If a relationship with an employee has broken down, a legally binding settlement agreement will provide you with protection against future claims.

Settlement agreements can be offered to terminate an employment contract or to bring an ongoing employment dispute to an end.

Our specialist employment solicitors have significant expertise in drafting and negotiating appropriate settlement agreements which minimise the risk of further comeback.

By their nature, such agreements depend very much on the unique circumstances of the employment and its termination. They may be straightforward or complex, particularly if the agreement includes bonuses and long-term incentive plans.

We will work closely with you to understand your situation and advise on the most appropriate approach to your matter. We can also assist with negotiations and drafting the final document to ensure that appropriate terms are included to protect your position.

To discuss using a settlement agreement, please speak to a member of our employment legal team in St Albans, Harpenden or Luton.

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OUr Employment LAW team


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Frequently asked questions

What is a settlement agreement?

A settlement agreement, previously known as a compromise agreement, is a legally binding agreement between an employer and employee that sets out the terms of ending an employment relationship. It typically includes a compensation payment and other provisions such as confidentiality clauses.  The employee agrees to waive their rights to bring claims in the employment tribunal in relation to their employment or the termination of their employment.

Are settlement agreements enforceable?

Yes, settlement agreements are legally binding and enforceable under UK law, as long as certain conditions are met. For example, the employee must have received independent legal advice before signing the agreement.  This means that once the employee has signed the agreement, they cannot pursue the claims which have been waived by the agreement.

Does the employee have to seek legal advice on the settlement agreement?

Yes, the employee’s waiver of claims will only be effective where they have received independent legal advice.  As a result it is common for the employer to make a contribution to the employee’s legal fees for this advice.  A standard contribution is usually between £500 and £1500 depending on the nature of the disputes to be settled.

When is a settlement agreement used?

In some circumstances, the employer may approach an employee to have a “protected conversation”.  This is a conversation where the employer offers to terminate the employment relationship on agreed terms subject to the employee entering into a settlement agreement.  This can be used as an alternative to a redundancy or disciplinary process.  It is important to take advice on how to approach a protected conversation to avoid this causing grievances or claims.

Settlement agreements can also be used to resolve disputes between the employer and employee.

Can a settlement agreement be negotiated?

Yes, settlement agreements can be negotiated between the employer and employee. It is common for the employee to seek changes to the initial terms offered, such as a higher termination payment or a more favourable reference. Taylor Walton is experienced in advising employers and employee on settlement negotiations and can assist you with a pragmatic approach.


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