• What is a Settlement Agreement?

    Settlement Agreements (previously known as compromise agreements) are legally binding agreements between an employer and employee. The purpose of a Settlement Agreement is to provide a formal means by which an individual agrees that they will not bring specified claims against their employer, often at the end of their employment. Take a look at our tips on what to expect in a settlement agreement.

    Why do I need legal advice?

    Settlement Agreements are not legally enforceable unless they meet certain requirements – one being that the employee has received independent legal advice on the terms. This advice is most often provided by a solicitor, preferably an employment law specialist.

    Employees have to receive the advice before signing the agreement to ensure they understand the terms of the agreement and the effect this has on their ability to bring a claim against the employer.

    What rights am I waiving by signing the Settlement Agreement?

    You would be waiving the rights set out in the agreement; these can include:

    • Statutory rights; for example, your right not to be unfairly dismissed, your right to a statutory redundancy payment, maternity and paternity rights, as well as the right not to be discriminated against;
    • Contractual rights as set out in your employment contract, such as your notice period, salary and other benefits including bonuses, pension and shares; and
    • Other rights; for example rights to holiday pay and in some cases rights in respect of injuries or ill health you have suffered.

    Do I have to sign the Settlement Agreement?

    No. An employee has a choice whether to enter into a settlement agreement or not.

    I am not happy with the deal offered. Can I negotiate?

    Yes. To comply with the legal requirements, you do need to get advice on the terms of the agreement. However, if you feel that what has been offered is not acceptable to you then you can seek to negotiate a different arrangement. Take a look at our top tips on how to negotiate a settlement agreement.

    Legal costs

    An employer normally pays a contribution towards an employee’s legal fees for obtaining advice on the terms of the agreement. These contributions are normally around £350 – £500 plus VAT.

    What happens next?

    Once you have been provided with a draft settlement agreement, you will need to seek advice on the terms from an independent adviser. If you decide to sign the agreement once you have been advised about the content, then your solicitor will normally be asked to provide a certificate confirming advice has been given.

    If a settlement agreement is offered we have extensive experience of providing the required independent advice, particularly in relation to senior individuals, including Directors.

    We are able to explain the implications of settlement agreement terms including those relating to employee benefits entitlements, such as share options and retention plan entitlements. If you feel the offer is not in your best interests, Brachers can negotiate with your employer on your behalf and draft changes to the documentation to protect your interests.

    Documents we will need to see to be able to advise generally include:

    • the draft settlement agreement
    • your employment contract (if you have one)
    • background documents including documents relating to any benefits.
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If you have been given a settlement agreement by your employer you are legally required to take advice on its terms. This 1 hour online appointment is charged at £500 + VAT, which is
usually paid for in full or in part, by your employer. Please review our terms and conditions for more information.

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