Get the most out of your settlement agreement

Employers and employees often use legally binding contracts known as settlement agreements to resolve workplace disputes or simply to record the terms of an amicable parting of ways. At Smith Partnership, our dedicated employment team advises employees on every aspect of the settlement process, ensuring they enter settlement agreement negotiations from a position of strength. 

To find out how our employment team can help you get the most out of your settlement agreement, get in touch with us today.

What is an Employment Settlement Agreement?

Settlement agreements – formerly known as compromise agreements – are used to deal with exits that occur for a number of reasons, including redundancies, ill health, performance issues, conduct and more.  

For the employer, they guarantee that no claims will be brought by the employee, and for the employee, they deliver a guaranteed result that often includes a tax-free compensation payment, lump sum payment of notice pay and an agreed reference for prospective new employers.

The terms of a settlement agreement are legally binding once they are signed, and will normally provide for:

  • Any payments that are to be made to the employee upon the termination of employment e.g. redundancy pay, notice pay and compensation
  • Outstanding benefits owed to the employee, such as salary and holiday pay
  • A confidentiality or non-disclosure clause
  • A job reference that will help the employee find employment elsewhere
  • A contribution towards the legal costs incurred by the employee

As the terms of a settlement agreement can have significant implications for the parties involved, it is a legal requirement for employees to seek independent legal advice prior to signing one. 

Employers will almost always make a financial contribution towards the cost of you taking legal advice or pay for the entire fee. Settlement agreements that are signed without the employee having done so are not legally binding and cannot be enforced for that reason.

Settlement Agreement Advice for Employers

Settlement agreements can be used as an alternative solution to following a process to terminate an employee’s employment from a company. They can also be used as a form of protection for employers, whereby if a disgruntled employee leaves the business, part of the settlement agreement can be that the employee must not be bringing the company into disrepute.

However, it is important to know that if an employer and an employee are, for any reason unable to reach an agreement, then any discussions regarding the agreement may be unable to be used in any subsequent unfair dismissal claims.

As an employer, you can include the following on your settlement agreement:

  • An amount of compensation the company is willing to pay which may include, notice pay, redundancy pay and compensation
  • Restrictions on the future employment of the employee with competitors of the business
  • A confidentiality and/or non-disclosure clause
  • The job reference the employer is prepared to give

You may include other details, which our specialist solicitors in employment law can assist you with.

If there has been a breach of the settlement agreement by the employee, you can either seek to further enforce those terms, or rely on the assistance of employment solicitors for businesses who specialise in litigation and dispute resolution to bring a breach of contract claim.

Settlement Agreement Advice for Employees

If you are an employee who has a complaint against your employer, you may be able to avoid an employment tribunal and reach a compromise agreement or settlement agreement. This would be instead of trying to pursue a claim for constructive unfair dismissal, if an employee resigns, or unfair dismissal, if the employment is terminated.

We strongly recommend that when you are considering your employer’s offer within the settlement agreement, you think about some of the following:

  • The strength of your potential claim
  • Whether you want to keep your job  or if you want to leave
  • The difference between their offer and what you could potentially receive through tribunal
  • What your options are, and how you would like to proceed, should you refuse to accept the offer

You may be concerned about getting a job after entering into a settlement agreement. In some instances, your ability to find a new job may be compromised by signing a settlement agreement. For example, your employer could declare that you cannot go to work for a direct competitor for a period of time after termination or try to prevent you from taking  any job that could lead you to poach clients from them. These types of clauses are referred to as restrictive covenants. The clause in the settlement agreement can either refer to already existing clauses in the contract of employment, or it may provide for new restrictions.

If your employer breaks the agreement in any way, you can go to court to claim against the breach of contract by the employer.

Employment solicitors can assist you with settlement agreement negotiations to achieve the optimal outcome.

 

Settlement agreement calculator

Are you currently working on agreeing the terms of your settlement agreement?

Use our settlement agreement calculator, designed by a team of legal experts, to calculate the potential value of your settlement agreement.

The calculator assumes the following:

  • You have been dismissed within the last 3 months
  • You have 2 or more years of service with your employer
  • You have been unfairly dismissed or unfairly forced to resign
  • You have not found a new job
  • You are not claiming to have been discriminated against or are a whistle-blower
  • You have not received statutory redundancy pay

If any of the above criteria do not apply to you, please contact us directly either by emailing sa@smithpartnership.co.uk, or calling us on 08000 32 32 02.

Please note that your settlement agreement payment will also be subject to tax and NI (National Insurance), and so you should keep this in mind when reviewing your estimated figures.

Should you have any questions regarding your estimated value, or you wish to discuss your settlement agreement in further detail with one of our dedicated settlement agreement solicitors, please feel free to get in touch with us directly, either by emailing sa@smithpartnership.co.uk, or calling us on 08000 32 32 02.

When Does a Settlement Agreement Become Binding?

The terms of a settlement agreement are legally binding once they are signed by all parties and dated, and will normally provide for:

  • Any payments that are to be made to the employee upon the termination of employment e.g. redundancy pay, notice pay and compensation
  • Outstanding benefits owed to the employee, such as salary and holiday pay
  • A confidentiality or non-disclosure clause
  • A job reference that will help the employee find employment elsewhere
  • A contribution towards the legal costs incurred by the employee

As the terms of a settlement agreement can have significant implications for the parties involved, it is a legal requirement for employees to seek independent legal advice prior to signing one. 

Employers will almost always make a financial contribution towards the cost of you taking legal advice or pay for the entire fee. Settlement agreements that are signed without the employee taking independent legal advice are not legally binding and cannot be enforced for that reason.

When is a Settlement Agreement Valid?

For a settlement agreement to be considered valid, it must meet the following conditions: 

  • The agreement must be in written form
  • The employee must seek legal advice from a qualified professional
  • The agreement must specify the adviser
  • The agreement should relate to a specific complaint or proceedings
  • Independent advisers should hold a valid contract of insurance or professional indemnity
  • The agreement should state that the applicable statutory conditions that regulate it have been met

If the agreement fails to meet any of the above conditions, or if the two parties fail to come to a resolution, the settlement agreement will not be enforceable, and employees may potentially still pursue claims against their employer through the employment tribunal.

What is the Time Scale for a Settlement Agreement?

The ACAS Code of Practice states that employees seeking a settlement agreement should be given a reasonable length of time to consider the terms set out in the agreement. In most cases, employees must be given 10 calendar days to consider the agreement and take legal advice.  Consequently, it’s important to take action as soon as possible in the case that you’re offered a settlement agreement. 

The team at Smith Partnership recognise the importance of speaking to a legal professional quickly. For this reason, we offer a dedicated team of employment experts who are available to advise you on short notice – often within the space of just one working day.

What are the Settlement Agreement Legal Costs?

Given the fact that settlement agreements require the employee to speak to a legal expert in order to be valid, employees will often be concerned with the legal costs associated with taking the advice. Taking a client-focused approach throughout the process, our employment law solicitors do everything in their power to minimise any costs incurred on the employee’s part. 

We always aim to keep legal costs within the boundaries set by your employer’s contribution, as in most cases, these costs are covered by the employer and not the employee. In cases where this isn’t possible, we will seek to negotiate an increase in the contribution made on the part of your employer.

How can Smith Partnership’s Settlement Agreement Solicitors Help You?

If you have been offered a settlement agreement by your employer, our expert settlement agreement solicitors can help you get the most out of the negotiation process.

Our mission is to ensure that our clients achieve the best possible result when offered a settlement agreement or when facing issues relating to their employment. Our services include:

  • Advising on the strengths and weaknesses of your case
  • Advising on its potential value
  • Negotiating with your employer directly or assisting you in conducting negotiations
  • Reviewing, amending, and completing your settlement agreement
  • Representation at courts and employment tribunals when settlement is not achieved

Building upon an extensive track record of success in this area, our employment solicitors are able to offer practical legal advice that helps you achieve the result you’re looking for.

Smith Partnership’s employment lawyers can review your settlement agreement with you and very often help to negotiate much more favourable terms.

From securing extra compensation to obtaining the most favourable terms of leaving your employment, we are commercial and pragmatic negotiators who do not like to see employees being short-changed. For this reason, we will fight your corner to ensure the final agreement is in your best interests.

Smith Partnership’s Settlement Agreement Approach

The specific objectives of settlement agreement negotiations may vary from person to person. For example, you may want to secure higher settlement payments or want to be released from post-termination restrictions (restrictive covenants). Drawing on our extensive experience, we work with you to establish your ideal outcome and advise on the appropriate strategy for achieving it. 

More often than not, we will raise points for negotiation that have never been considered by our clients. Having acted for employees with regards to thousands of settlement agreements over the years, we can deliver a better deal in the vast majority of cases.

Contact our Settlement Agreement Solicitors Today

To find out how our expert team of solicitors can help you, contact us today on 08000 32 32 02, or send us an email via sa@smithpartnership.co.uk.

James Johnson, head of employment at Smith Partnership, and Alexandra Bullmore, an expert solicitor, both with specialisms in employment law, are on hand to help.

FAQs

Settlement agreements are used to resolve disputes between employees and employers, normally at the end of the employment. The law surrounding settlement agreements requires that employees must have independent legal advice in order for a settlement agreement to be binding. It is customary for the employer to pay a contribution towards the employee’s legal costs in taking advice on the settlement agreement.

Settlement agreements can be complex. It is important that the agreement properly deals with the settlement of claims, applies the tax rules correctly, and sets out obligations regarding the employee’s post employment restrictions and confidentiality. As a settlement agreement is a legal document, it is advisable to instruct solicitors to draft an agreement appropriate to the employer’s requirements.