What is a Settlement Agreement?

A settlement agreement is a legally binding contract between an employer and an employee, which comes into play more often than not when an employee is leaving the business. The contract normally documents an agreement under which the employee waives rights to make a claim covered by the agreement to an employment tribunal or court and in return for which terms are agreed under which the employee is agreeable to leave employment. Settlement agreements are sometimes called compromise agreements which is a name by which they were previously known. Settlement agreements can be proposed by either an employer or an employee and can be offered at any stage of an employment relationship.

They can be used to end employment on agreed terms or to resolve an ongoing dispute, for example, a dispute over holiday pay. They are also very commonly used in redundancy situations or TUPE situations for example where a site moves and employees don't want to relocate but rather leave employment. For a settlement agreement to be legally binding, certain conditions must be met. The main ones are:

  • It must be in writing;
  • The agreement must relate to a particular complaint or proceedings;
  • The agreement must be signed by the employee;
  • The employee must have received independent legal advice on the terms from a lawyer or a certified and authorised member of a trade union. The adviser must be identified in the agreement and the adviser must be insured;
  • The agreement must state that the statutory conditions regulating settlement agreements have been met.

Settlement agreements are voluntary on both sides and neither party has to agree to it or enter into discussions about them. Usually, there is a process of negotiation during which both sides state their proposals or counter-proposals until an agreement is either reached or until it is decided that no agreement can be reached. The discussions on a settlement agreement are often made on a “without prejudice” basis in order to protect the conversation. They can also be suggested as part of a protected conversation which is a process under which employer and employee in certain circumstances can talk more freely about the termination of employment and the conversation is then not disclosable in any future legal proceedings.

Once a valid settlement agreement has been signed, the employee will be unable to make any claim specified in the agreement at an employment tribunal or a court. Where the parties are unable to reach an agreement, the settlement discussion cannot usually be referred to as evidence in an employment tribunal or in the court. It is normal for parties to negotiate on the terms of a settlement agreement. Our solicitors are very experienced and can fully advise employers and employees on the common terms in an agreement.

Terms which are normally negotiated relate to:

  • 1. Agreed references
  • 2. Announcements
  • 3. Outplacement services
  • 4. Taxation
  • 5. Negotiation on the settlement sum or as it is often known the "ex gratia" payment

If an employee decides not to sign the settlement agreement, the time limits with which they must comply in order to pursue legal claims at an employment tribunal are normally three months less one day from the date the employment terminated or in the case of discrimination claims, three months less one day from the date of the discriminatory act. We are able to offer advice as to the prospects and merits of any claims in the event that negotiations are unsuccessful.

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.

What our clients say about Consilia Legal on


  • review rating 5  Marie and her staff have been very helpful. Marie had assisted me previously with an employment law issues so I had no hesitation in engaging her again. She helped me through an unpleasant job related matter when I was at a low ebb and feeling unable to fight my own corner. As before Marie gave sound, straight forward advice and took over the handling of communication with my employer until the matter was resolved. When I had to take action myself Marie was always there to consult if I was worried about something. I would thoroughly recommend Consilia Legal to anyone.

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    6/24/2019
  • review rating 5  Very professional and got the right result for me in a very timely abs efficient manner. Great service, good advice and an excellent result I couldn’t have got on my own

    thumb Jon Geldart
    5/23/2019
  • review rating 5  Received a really good service from Marie and the team including Emma, who offered valuable support throughout. I contacted Consilia following a recommendation from a union representative. Was given great advise through her trusted associate who offered an accurate and professional assessment. Marie secured a really good outcome due to her knowledge, perseverance, conscientiousness and genuine desire to try and get the best outcome on my behalf. A lot of genuine empathy and respect expressed and a brilliant negotiator. Very well informed, experienced and brilliant communicator. True to her word re costs as discussion was upfront and honest. Very reasonable rate compared to other firms. Would recommend to others Thank you very much!

    thumb Elaben Mistry Jackson
    5/26/2019
  • review rating 5  Excellent service from Laura Clapton guiding me through a difficult divorce process. Super efficient, professional and carries out the work with understanding and compassion for your situation. Would highly recommend and have already recommended.

    thumb Jo Allan
    4/09/2019
  • review rating 5  Marie, Andy, Victoria and Emma were exceptional in their help, advice and support – all done with a non-nonsense super friendly approach. Really took the stress out of a difficult corporate employment process. I felt safe and confident in their capable hands, recommending them highly.

    thumb Sophie Webb
    6/03/2019

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
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Victoria Horner
Senior Associate, Employment Law
0113 887 4673
vhorner@consilialegal.co.uk
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