A guide to settlement agreements for employees

Settlement Agreement concept
We are not currently offering Employment advice services. The following is for informational purposes only.

You may have been offered a settlement agreement by your employer and be wondering what it is all about. These types of agreements can often be very complex which is why it is important to seek advice from a professional.

In this article, our experts are going to explain some of the basic principles of settlement agreements to help employees should they ever be faced with one.

What are settlement agreements?

A Settlement agreement is a legally binding contract between an employer and employee where the employer offers payment to the employee in exchange for the employee’s promise not to pursue any claims against them.

The agreement also normally contains other obligations, such as confidentiality.

Its purpose is to protect employers, which is why employees must seek expert advice from a solicitor before signing to ensure they aren’t agreeing to anything unreasonable. It is also a legal requirement to do so, to make the agreement valid or binding.

When would settlement agreements be used?

Settlement agreements are often used as a way to resolve a dispute between the parties and ensure the employee does not pursue claims against their employer.

Typically they are used in scenarios where the working relationship has broken down.

What is typically included in a settlement agreement?

The terms of a settlement agreement vary depending on the individual circumstances. Nevertheless, a typical settlement agreement will normally contain the following provisions:

  • The value of any payments including accrued holiday, notice pay and your final salary
  • A compensation payment for loss of employment may also be included
  • Confidentiality clauses
  • The claims settled and any exclusions that apply
  • Clauses regarding returning and collecting property
  • How much the employer will pay towards legal costs
  • What happens if you breach the terms of the agreement
  • An agreed reference

Once the settlement agreement is signed by all parties it will be legally binding.

Why do you need advice from a solicitor?

It is a condition of settlement agreements that for it to be valid or binding, the employee must have received independent legal advice.

This is to ensure that someone with experience of the likely pitfalls and drafting problems of these types of agreements can advise the employee on exactly what they are agreeing to.

How we can help?

For reliable legal advice to help secure a settlement agreement that you are happy with, please get in touch with Cartwright King today.

Our Employment Law team goes above and beyond to give you the support you need. We listen, we understand and we genuinely care about your rights making sure that you’re treated fairly and with respect. 

Find out more about how we can help at https://cartwrightking.co.uk/services/employment-law-solicitors/settlement-agreement/

Legal Disclaimer.

All advice is correct at time of publication.