Settlement Agreements

A Settlement agreement, also known as a Compromise Agreement, is a legally binding agreement between an employer and an employee. It is often used to resolve employer/employee disputes, preventing the employee from taking legal action and pursue a claim against the employer. While offering the employee financial payments, the employer can use a settlement agreement to protect the interests and the reputation of the company.

When is a settlement agreement used?

Your employer can offer you a settlement agreement either during or following the end of your employment contract. It often comes with an enhanced redundancy package that features a greater payment than any statutory minimum. This is sometimes used to reward long service or just to prevent disagreements that often arise during the redundancy process.

Employers also offer a settlement as a way to avoid a or disciplinary procedure, which helps to save the employee’s career prospects. Moreover, some companies might also grant compromise agreements to all outgoing employees for a variety of reasons, which often include protecting themselves from future claims.

My employer offered a settlement agreement, do I have to accept it?

You are not obliged to accept it, however, your employer may be considering ending your employment anyway. If you feel you have been treated unfairly, you could still pursue a claim after turning down a settlement proposal, but you might not be offered as much money as you were offered initially. Our expert Employment Law solicitors can advise on what’s best for your interests depending on your circumstances.

What payments are included in a settlement agreement? 

A settlement agreement usually includes any outstanding contractual payments up until the termination of employment, notice period benefits and any post-employment bonuses offered by your employer.

Does having legal representation help?

Approaching your employer with the legal support of a specialist Employment Law solicitor may increase your chance of receiving more money. Your employer may acknowledge that you are considering taking legal action and pursuing a claim, and therefore accept to offer you a higher payment instead of risking legal fees later.

Mohamamd Wajid Head of Employment Law
settlement agreement

Do I have to pay my solicitor’s fee myself?

It depends. If you take advice about a settlement agreement, but you decide not to accept your employer’s offer, then you may still have to pay all of your solicitor’s fees. However, once you sign the settlement agreement, it will be your employer’s responsibility to pay for your legal fees.

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