Settlement Agreement Solicitors

If you’re an employee facing redundancy and your employer has mentioned a ‘settlement agreement’, you might well be wondering what that means, what they are and what are the implications of signing one?

With unemployment likely to rise due to the Covid-19 crisis, more and more people will be facing these questions over the coming months and years.

Here we explain exactly what a settlement agreement is and how we can help should you be presented with one.

What is a settlement agreement?

Settlement agreements are contracts that stop employees bringing claims against their employers. Sometimes these are called by a few different names. These include:

  • Compromise agreements
  • Gagging clauses
  • Termination agreements
  • Mutually agreed resignations
  • Ex-gratia payments
  • Golden goodbyes

The correct legal name for any of these contracts is ‘settlement agreements’, however.

If you require assistance and advice on any employment settlement agreements related matter, you can contact us on Freephone 0333 800 0033.

When are settlement agreements used?

Settlement agreements are a legal contract between you and your employer. They are usually offered when an employee faces redundancy, or when an employer feels that an employee is guilty of misconduct or is seriously underperforming.

The document will usually contain an offer of a sum of money in return for terminating employment. The agreement will outline the terms of departure and will usually include a waiver of the right to bring claims against the employer.

Settlement agreements can be used to terminate your employment or to settle an ongoing claim you are bringing in an employment tribunal or a court.

Why might I choose to sign a settlement agreement?

A settlement agreement can offer both employer and employee a clean break, but it’s important that it’s given proper consideration before signing.

Some of the potential benefits for the employee are:

  • You can reach mutually agreed terms and part amicably.
  • They avoid the sometimes considerable costs of an employment tribunal.
  • Retaining a reference. In a redundancy situation it may be possible to negotiate the contents of a reference.
  • Tax free. The first £30,000 of any settlement payment is free of tax.
  • Costs are often met by the employer capped at no more than £500 plus VAT. Before signing a settlement agreement it’s important to seek impartial legal advice. Most settlement agreements will contain a clause that commits the employer to paying reasonable costs.

Do I have to accept a settlement agreement?

No one has to accept a settlement agreement. However, your employer may still be able to sack you fairly, and you may not receive a better offer. A solicitor with experience in employment law will be able to advise whether it is advisable to accept the offer or consider a further claim.

Never sign a settlement agreement without seeking advice

Settlement agreements are legally binding documents in which you waive most of your rights. They should never be taken lightly, nor should they be signed without proper consideration.

It’s important to seek professional advice before you sign any agreement. At Murria Solicitors we regularly advise Client’s on settlement agreements, giving our clients peace of mind before they sign.

For more advice about settlement agreements, contact us and speak to our specialist settlement agreement solicitors today.

We offer fixed fee services for Employment.

Contact Us


0333 800 0033


or call/write:

    The data you submit will only be used by Murria Solicitors for the purpose of dealing with your enquiry.

    Related Case Studies

    Related Case Studies

    Claim for sex discrimination, harassment and automatically unfair dismissal

    We represented a senior director for one of the worlds major retailers in her claim for sex discrimination, harassment and automatically unfair dismissal.
    Our Client who was headhunted for her new position suffered close personal bereavements and also suffered a miscarriage which resulted in her taking time off... More

    Constructive Dismissal or Unfair Dismissal?

    Have you experienced a constructive dismissal or have been treated so unfairly that you had to resign? Our expert employment law solicitors are experienced to deal with constructive and unfair dismissal claims and advice you on making applications to the tribunal and getting the right compensation.

    The difference between an employee, a worker, a self-employed contractor and a volunteer

    This business development briefing just provides an overview of the law in this area. You should talk to a lawyer for a complete understanding of how it may affect your particular circumstances. It explains the significance of the distinction between an employee, a worker and a self-employed contractor and also highlights the legal status of volunteers.