Settlement Agreements Advice for Employees

A Settlement Agreement is a legally binding document. The signing of the agreement will thereafter prevent the employee bringing a claim against the employer.

Danielle Wright

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Entering into a settlement agreement with your employer can seem a little daunting, but with the right legal advice, the process can be straightforward and stress-free.

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We act quickly to help you. If you are ready to sign off the agreement, we can arrange an appointment and provide advice on the same day if the matter is urgent, but most agreements are signed off within 48 hours unless detailed negotiations are required. We can provide advice nationally so you can be based in any location, and we will be here to help.

Appointments can be arranged via telephone or video, or if you prefer a face-to-face appointment, we can meet at our Chesterfield office.

Get in touch with us today on 08000 93 00 94 to book an appointment with our Head of Employment Law, Danielle Wright, who can provide independent legal advice on the terms of the agreement.

Danielle Wright

I have been advising employees on the terms and effect of settlement agreements for many years now. I like to take a friendly and helpful approach to ensure my clients understand the terms they are signing up to. By their very nature, settlement agreements can appear complex and include legal terminology that is not easy to understand. My role is to break the terms down and explain what they mean in clear language and to ensure my approach (particularly if negotiations are necessary), is appropriate to the outcome my client is seeking.” 

Danielle Wright, Associate Solicitor

To speak with Danielle directly, email

Key facts and information

A settlement agreement is a legally binding, enforceable contract between an employer and employee with the purpose of settling any employment claims the employee may be able to bring against the employer (with some limited exceptions).

In exchange for waiving all rights to pursue claims, the agreement will set out a discretionary payment that will be paid to the employee along with some other key terms that are to be agreed to.

An employee is legally required to seek independent advice on any settlement agreement they are offered. This is so the terms, and in particular the effect those terms have on the employee's ability to pursue claims, are fully understood. Without this essential requirement, employers could put pressure on employees to leave and waive claims without understanding their rights. As a firm of Solicitors, we have a policy of insurance in place which protects you from any risk and loss you may suffer having received advice from us.

It usually takes 30 minutes to one hour to go through the terms of the agreement. If you are ready to sign, we can arrange an appointment and provide the advice on the same day if the matter is urgent, but most agreements are signed off within 48 hours unless detailed negotiations are required. We can provide our advice face-to-face, by telephone or via a video appointment.

Your employer will offer a contribution towards your legal fees and in most cases, this will cover your fees in full. Sometimes negotiations are required, and you may need to consider supplementing the contribution, but we will always be clear as to costs before we proceed to act on your behalf.

There will be a clause in the settlement agreement confirming that you are obliged to keep the terms of the agreement and possibly its existence, as well as the circumstances surrounding the termination of your employment, confidential. This is common practice.

There will be certain exceptions to this such as being able to discuss the matter with your legal adviser, immediate family, doctor, and counsellor or as required by law. It is therefore important that you do not discuss the matter with anyone before seeking legal advice.

Often employers will include a clause whereby employees agree to not make any derogatory statements about the company and will not do anything to bring their reputation into disrepute. In most cases, this will be a reciprocal clause whereby the employer agrees to use their reasonable endeavours to preclude employees from making negative comment about you.

With some exceptions, generally the first £30,000 of termination payments (often referred to as ex-gratia payments) are paid free of tax and National Insurance contributions. Any payments made in relation to wages, holiday and notice pay are taxable in the usual way. The agreement will include a tax indemnity clause stating that if any tax liability arises, it will be your responsibility and not the employer's.

This means that if the Inland Revenue makes a demand against the employer for tax, then the employer can recover that sum from you, together with any interest, penalties, or associated costs. This is usually not something to be worried about if the agreement properly records what is taxable and what is not in accordance with current rules.

A reference that the employer will provide to future employers is usually appended to the agreement. Often it will be a factual reference, but we can on your instructions request a more favourable reference to be provided. This may not be agreed but we tend to find employers are agreeable if reasonable wording is provided for their consideration.

There may be a clause in the settlement agreement which confirms that any clauses in your contract of employment regarding confidentiality and post termination restrictions (restrictive covenants) are reinforced and must be abided by. You may wish for this clause to be amended, particularly to remove any non-compete obligation. We can discuss this with you during our appointment.

Enquire Online or call us on 08000 93 00 94 for further advice. We are happy to answer any questions you may have.

Why Choose Spencers Solicitors For Your Settlement Agreement?

We are settlement agreement solicitors based in Chesterfield, Derbyshire. We help clients locally and across England & Wales with their settlement agreements, with a fast and efficient turnaround time.

Our expert employment law solicitors are here to help you, so please get in touch today.

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