Settlement Agreement Terms

A settlement agreement generally contains the following terms:

  • 1. An agreed termination date;
  • 2. Payment of salary and provision of ongoing benefits to the agreed termination date;
  • 3. Payment in lieu of notice (unless the employee is working their contractual or statutory notice);
  • 4. Payment of any accrued holidays to the termination date;
  • 5. Termination/ ex gratia payment;
  • 6. A reference;
  • 7. Confidentiality provisions in respect of the negotiations leading up to the agreement and the terms of the agreement itself;
  • 8. Non derogatory comments obligation
  • 9. Return of any company property;
  • 10. Reiteration of any post termination restrictions that are set out in the contract of employment or a provision for new restrictions;
  • 11. Contribution towards an employee’s legal fees;
  • 12. A full waiver by the employee of any specific employment related claims or rights.
  • 13. An Advisors certificate for signature by ourselves; and
  • 14. Sometimes a reaffirmation provision

It is usual for an agreement not to settle claims in respect of an employee’s accrued pension rights, as these have accrued in the past and cannot retrospectively be removed by an employer outside the rules of the pension fund. In addition, there is usually a clause dealing with any future claim for personal injury against an employer. Personal injury claims are either excluded from the agreement completely or the employee only signs away the right to pursue claims for injuries of which they are already aware.

In terms of the termination payment, this may be offered on a tax-free basis. Tax issues are complicated and will vary from case to case. Generally speaking up to £30,000 can be paid free of tax provided it is paid as compensation for loss of employment and does not contain any contractual entitlement such as notice pay, holiday pay or salary. New rules came in in 2018 which changed the way in which payments in lieu of notice can be dealt with under the terms of a settlement agreement. You may see the term Post Employment Notice Pay (PENP) in the agreement. We can not advise you specifically on tax matters but we can certainly signpost you the best advisors if necessary.

For more information please contact us on 0113 322 9222 to speak to one of our employment law specialists.


Our Employment Law Team

Marie Walsh
Employment Solicitor & Workplace Mediator

Marie Walsh is a fully trained workplace mediator. As an employment law solicitor and mediator, Marie has a wealth of experience assisting parties inside and alongside the workplace mediation setting.

Andy Boyde
Associate Employment Law

Andy Boyde is a former professional rugby union player and employment solicitor. Andy qualified as a solicitor in 2015 and specialises in advising individuals, owner managed businesses and SMEs. Andy provides sensible, straight-forward and commercial advice to his clients.

Victoria Horner
Senior Associate, Employment Law

Victoria is an associate at the firm and an experienced solicitor in the Employment team. She provides expert practical advice and assists both individuals and Commercial clients. Victoria is approachable, reliable and straight talking.

Emma Cartlidge
Employment Law Solicitor

Emma has a joint honors degree in English Literature and Philosophy from the University of the West of England, Bristol. Emma has completed the Graduate Diploma in Law at the University of Law in Bristol and the LLM Legal Practice Course at Leeds Law School.

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Awards and Accreditations

Laura Clapton
Director, Family Solicitor & Mediator
0113 887 4672
0786 023 2975
laura@consilialegal.co.uk
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Marie Walsh
Director, Employment Solicitor & Mediator
0113 887 4670
07736 252 681
marie@consilialegal.co.uk
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Emma Cartlidge
Employment Law Solicitor
0113 887 4674
ecartlidge@consilialegal.co.uk
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Andy Boyde
Associate Employment Law Solicitor
0113 322 9222
a.boyde@consilialegal.co.uk
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Victoria Horner
Senior Associate, Employment Law
0113 887 4673
vhorner@consilialegal.co.uk
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