Settlement Agreement Negotiations: 10 Tactics

If you’ve been offered a settlement agreement (formerly known as a compromise agreement) or are on the verge of entering settlement agreement negotiations with your employer, you may be wondering what steps you can take to deliver the best possible outcome for you.

Luckily, there are a number of strategies you can use to significantly strengthen your bargaining position and negotiate more favourable terms. In this article, we’ll be offering an inside look at 10 useful tactics that can help you get the most out of your settlement agreement. Let’s begin.

Can I negotiate a settlement agreement?

If you have been presented with a settlement agreement from your employer and you do not agree with the proposed terms, then you may attempt to negotiate a different outcome.

For example, you may want to negotiate things such as your reference, or your final settlement agreement figure, should you feel they are not satisfactory.

There are certain tactics you can use when negotiating your settlement agreement with your employer, which we have outlined below.

1. Instruct a Settlement Agreement Solicitor

Due to the potential complexities associated with employment settlement agreements, it is a legal requirement to seek independent legal advice before signing a settlement agreement.

Specialist settlement agreement solicitors can help employees better understand the practical implications of the terms on offer, advising them on any potential risks and pitfalls. Adding to that, the employer will almost always offer a financial contribution to the legal costs. The benefits of seeking independent legal advice extend beyond simply ticking a required box; it can also play a crucial role in delivering a successful outcome to negotiations.

Employees may be aiming to achieve a variety of outcomes. Whilst some may be looking to maximise the financial compensation awarded to them, others may want to focus on minimising any restrictions (such as restrictive covenants) that follow from the termination of the employment relationship. An employment lawyer who specialises in settlement agreements will be able to advise you on the most suitable strategy for achieving each of those objectives.

2. Don’t Accept the First Offer

Employers will often allow for some leeway during negotiations, meaning that their first offer is rarely their final offer. Although some employers may decide to play hardball, it is very rare for an employer to take a deal off the table just because the employee tries to get a better deal. As such, holding your nerve may lead to a better result in the long run.

You will enjoy strong legal protection if you’ve been in the employer’s service for more than two years. In such a case, you may be able to argue that your dismissal or future dismissal is unfair or that the employer’s actions amount to constructive dismissal. The statutory protection afforded to you by the right not to be unfairly dismissed can bolster your position when negotiating a settlement agreement.

Even without the two years’ service required to make an unfair dismissal claim, a wide variety of claims can still be argued. Depending on the circumstances, these include potential discrimination claims, whistle blowing protection and automatic unfair dismissal claims that do not require a specific length of service, such as dismissals for asserting certain statutory rights (for example receiving holiday or national minimum wage).

3. Avoid Handing in Your Resignation

If you’re involved in a dispute with your employer, it’s advisable not to resign until you have taken legal advice. The main reason for this is that your resignation may negatively impact your negotiating position. Depending on the strength of a constructive dismissal claim – the term used to refer to forced resignations resulting from an employer’s conduct – you may struggle to achieve a good settlement if you resign.

If you remain in employment, your employer will have to pay you a settlement in order for you to leave. In most cases where an employee leaves without a settlement, the employer will wait for the employee to issue a claim prior to settling. In turn, this leads to higher costs on the part of the employee.

4. Consider What Your Employer Wants

Every negotiation will see the relevant parties attempt to forward their own interests, and settlement agreement negotiations are no different. For that reason, you should try to consider negotiations from your employer’s perspective.

Your employer may be looking to secure a clean and easy exit, an agreed and neutral announcement to colleagues and customers regarding your departure, an agreement to keep arrangements confidential or to ensure a smooth transition to your successor.

Whatever the case, offering these as a condition of the agreement can go a long way in getting you the settlement you deserve.

5. Play Hardball

Although there are some exceptions to the rule, employers will often be minded to offer a better settlement to deal with a problem rather than simply reward loyal service. For this reason, it’s important to clearly and robustly set out your case and potential claims if you’re being treated badly.

Having said that, it’s equally advisable not to burn bridges and go over the top. Instead, you should simply argue your case as to why you feel your settlement is unreasonable or your treatment is unfair. If you’re unsure on how best to approach the issue, delegating these tasks to a specialist employment lawyer may be the best option for you.

6. Meet Deadlines

Most employment claims are subject to a three-month deadline starting from the relevant event. If your claim relates to discrimination for example, you’d normally have to start your claim within three months (less one day) of the act. If you resign or are dismissed, the three-month deadline will start from the date your employment ended.

Missing the deadline can have significant implications for the success of your claim. Claims that do not meet the deadline are time-barred, which may result in you being unable to bring a claim against your employer. Due to the time constraints involved, you may also want to keep an eye on any tactics an employer might use to delay grievances, appeals and settlement discussions.

Timings can also work in your favour, especially when it concerns the 10-day consideration period set out by ACAS. These guidelines state that employees should receive a minimum of 10 days to consider the offer made to them, so make sure your employer takes heed of them.

7. Consider Raising a Formal Grievance

Raising a formal grievance can help to initiate or progress negotiations relating to a settlement agreement, forcing the employer to deal with the issues at hand and potentially recognise any weaknesses in their case. If an employer ignores a grievance or fails to deal with it in the correct manner, chances are it will bolster your potential claim and increase the level of compensation you might receive.

Adding to that, a grievance will also allow you to test the viability of your claim prior to starting it. As dealing with grievances can take up considerable management time, many employers will prefer to fast-track towards a solution in order to save time.

8. Keep Your Cool

Keeping your cool can be immensely beneficial when you’ve been offered a settlement agreement. In most cases, it is advisable to dispassionately ask for the agreement to be put in writing and state that you will consider the offer and take advice.

Employees who verbally agree to the first offer may experience difficulties further down the line in trying to re-negotiate. If consideration by a settlement agreement solicitor uncovers that the employee is being short-changed, it may often be too late.

9. Be Realistic

Taking a realistic approach can go a long way in maximising a settlement agreement’s benefit to you. Prior to the negotiations taking place, you should consider your main goal and negotiate from there.

It's also important to consider what is a reasonable settlement agreement - seeking a settlement that is in excess of or similar to the outcome you'd expect to get in an employment tribunal is unlikely to bring success, as your employer may be entirely content to argue their case in court.

Employers will be looking to achieve potential savings as part of the settlement, whether that be in the form of time, legal fees, publicity, or compensation.

10. Always Appeal

Internal appeal procedures can be a useful tool in ensuring the dispute stays at the forefront of your employer’s mind. As such, it is advisable to exhaust any appeal procedures available to you.

Failure to do so may be interpreted as you having accepted the decision taken, negatively impacting the potential success of your claim and impacting on your ability to successfully negotiate a good settlement package under a settlement agreement.


Negotiating a settlement figure can vary depending on specific circumstances, however, on average, the settlement agreement process can be completed in around five to seven days.

According to ACAS code of practice regarding settlement agreements, the employee should be granted 10 calendar days to consider the proposal, however, this time frame is not always guaranteed and both parties may agree on a longer or shorter period.


Often, a settlement agreement will include a clause, stating that your current employer should be willing to provide you with a reference that is deemed satisfactory, at the least, to help you get a new job.

However, this is not a legal requirement, and so it is important that you actively seek to include this as part of your settlement agreement.

A satisfactory or “standard reference” merely states your job title and dates of employment, therefore, if it’s particularly important to you that you obtain a positive, detailed reference, this must be included in the negotiations.

Additionally, to support this enhanced reference, it must be agreed that any verbal references given by your employer reflect this reference, and nothing false or misleading is said against you by your former employer.


If you’re in need of expert legal advice regarding any aspect of settlement agreements or employment law, our dedicated employment solicitors are on hand to help. Get in touch via, complete our contact form or call us directly on  08000 32 32 02.

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