Settlement Agreements

We can advise both employers and employees on Settlement Agreements. 

What is a Settlement Agreement?

A Settlement Agreement is a legally binding agreement which can be used in many situations to amicably bring an employment relationship to an end and have benefits for both parties.

The employer gets peace of mind that the employee is waiving their right to pursue Employment Tribunal claims or other employment-related claims against them. 

In return, the employee usually receives a lump sum compensation payment (which can be paid tax-free up to £30,000).

Settlement Agreements will include clauses covering mutual confidentiality obligations as well as practical considerations such as the termination date, any agreed announcement and/or reference, return of company property, payment of holidays and notice. 

For Employers 

We can advise you on your options when managing a difficult employee situation. Where appropriate this can include how to sensitively make the proposal to the employee and what a reasonable settlement offer would be. 

We can draft and negotiate Settlement Agreements which can be tailored to the specific needs of the situation. 

For Employees

If you are offered a Settlement Agreement, we can advise you on your options, including advising on the terms of the Agreement and advising you on your options should you choose not to accept. At this stage, we are happy to communicate with your employer on your behalf (if this is acceptable to your employer) because we understand it can sometimes be a difficult and upsetting time for employees. 

If you are facing a difficult situation at work with the potential for legal claims to arise, we can advise on whether it may be appropriate for you to approach your employer to propose a Settlement Agreement. 

We can help you negotiate the settlement package to ensure it is reasonable. 

Drafting the terms of the Agreement can often be done quickly and at short notice as we recognise the situation is often time-sensitive. 

If you have agreed the terms of a settlement package with your employer, we can review and amend (if required) the Agreement and arrange signature very quickly, particularly where the terms are straightforward.

Costs

To ensure a Settlement Agreement is legally binding, an employee must take independent legal advice on the terms and effect of a Settlement Agreement before signing it. For this reason, the employer usually contributes to the employee’s legal fees by paying the employee’s solicitor’s fee directly, up to the agreed maximum contribution. 

The legal fee contribution can be any agreed sum, commonly around £250 plus VAT – £750 plus VAT, but the appropriate amount will depend on the circumstances, including the complexity. 

For employees, it is quite often the case that the employer’s legal contribution will cover our fee in its entirety. Any work on Settlement Agreements is charged based on our hourly rate – we invoice the employer directly for their legal contribution and if there is any additional time on the file, this is invoiced to the employee separately. 

For employers, we will be able to provide a fee estimate following an initial discussion to determine the nature and complexity of the situation. 

When advising on Settlement Agreements, we usually invoice on completion of matters.