A Settlement Agreement is a legally binding contract between you and your employer which normally sets out the terms under which you give up your rights to bring legal claims against your employer. This will include details about how your employment will end and any compensation you will be paid.

Settlement agreement payments are often tax free up £30,000. The rate at which you will be taxed on settlements over £30,000 will depend on your earnings in that tax year. Other payments in settlement agreements such as notice pay, wages or bonuses are normally taxable. If you have not been given notice or a payment in lieu of notice then some of your settlement agreement payment may be taxable.

Settlement Agreements are often used for redundancy situations where your employer does not want to go through a lengthy process, is paying an enhanced redundancy payment, or is worried that your redundancy may not be fair.

You should not feel forced to sign a settlement agreement. Your solicitor should advise you on the value of your claims and whether the settlement agreement payment and terms are fair. If you don’t sign an agreement, you retain your right to bring legal claims against your employer but you may not receive the payments proposed in the settlement agreement.

If you agree to all the terms proposed by your employer the process will not take long. You will need to send us your contract of employment and the settlement agreement. We will review these documents and offer you an appointment within a day where possible. The advice meeting normally lasts up to an hour.

You are legally required to be advised by a lawyer or qualified Trade Union representative before entering into a legally binding settlement agreement and giving up your legal claims.

Your employer should contribute to the cost of your settlement agreement advice. The contribution is normally from £350 to £500 + VAT. If you ask us to carry out additional work, employers may increase their contribution to cover this work.

Employers will often say or write the phrase ”without prejudice” when corresponding with you about a settlement agreement. ‘Without prejudice’ applies to any communication which is made for the purposes of resolving an existing or anticipated legal claim. If communications are truly ‘without prejudice’ then they cannot be disclosed in legal proceedings.

Your employer may ask you take part in a Protected Conversation – a confidential discussion about the termination of your employment on agreed terms. Provided that your employer has not behaved improperly, the protected conversation cannot be disclosed in unfair dismissal proceedings only.