An employee’s guide to settlement agreements
What is a Settlement Agreement?
It is a legally binding agreement between an employee and employer to resolve a dispute or to terminate employment. The settlement agreement sets out the agreed terms between the parties.
Settlement agreements are often used in redundancy situations or where there is a dispute between the parties.
Typical terms found in a settlement agreement
A settlement agreement will typically include the following:-
- A waiver of claims clause – once a settlement has been signed, you will be prevented from being able to pursue any claims relating to your employment or its termination against your employer, apart from specific excluded claims.
- Confidentiality – there will likely be an obligation for you to keep the agreement confidential apart from permitted disclosures to your immediate family and professional advisers.
- Payments due to the employee, for example, a payment in lieu of notice (if the proposal is for your employment to end without working notice), holiday pay; a compensation/severance payment, payment of salary and benefits.
- Warranties – these are promises made by the employee to the employer
- Tax indemnity clause.
The above list is non-exhaustive but gives you an example of what you can expect to see in a settlement agreement.
Legal Advice
For a settlement agreement to be legally binding, you must take independent legal advice on the terms and effect of the agreement from an independent adviser, such as a qualified solicitor. It is common practice for the employer to pay for this legal advice, and this is usually set out in the settlement agreement as a contribution towards legal fees.
Is negotiation an option?
There could be an opportunity to negotiate on the terms offered by the employer under the settlement agreement. Negotiations must take place before the agreement is signed by both parties.
At Ellis Jones, we would be happy to advise you on your settlement agreement and to cap our fees at the contribution towards your legal fees, offered by the employer. If you require assistance with negotiating, we would be happy to do so and would discuss our fees for this work with you.
How can Ellis Jones help?
Our Employment Team are friendly and experienced in advising on settlement agreements and negotiating enhanced terms (where appropriate). If you have a settlement agreement, please contact our Employment team at settlementagreements@ellisjones.co.uk or phone 01202 525333.
How can we help?
When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.
