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What is a Settlement Agreement?

There are different types of Settlement Agreements, but the one most commonly referred to is in an employment dispute. A Settlement Agreement is a document which settles the legal disputes between an employee and employer. For the agreement to be binding the employee needs to obtain independent legal advice.

The agreement will often include a payment to the employee on the basis that the employee will agree not to pursue any potential employment claims to an Employment Tribunal or Court.

The employer will generally wish for the Settlement Agreement to be confidential, so that the employee can only discuss the agreement with their advisors such as a solicitor and their partner/spouse.

If you have been offered or are considering a Settlement Agreement then here are some tips:

Is there an agreement to provide a reference? Without a clause providing that your employer should provide a reference in the future, you will be unable to make them to do so. It is also a good idea to agree the wording of the reference and attach a copy to the agreement, so you know what will be said to future employers.

Are you paying Income Tax and National Insurance? Although a compensatory payment of up to £30,000 would generally be tax free; other payments should have Income Tax and National Insurance deducted, such as your notice period and holiday pay.

Do you have any post-termination restrictions? At the time of your employment you may have signed a contract agreeing not to carry out activities both before and after leaving your job. This can restrict your options when looking for future re-employment. Check your contract to make sure you do not have any post-termination restrictions. If you do it is likely a good time to discuss them with your employer including whether they will seek to enforce them and record this in the Settlement Agreement.

If you have agreed or are seeking a Settlement Agreement then get in touch with our employment team on 01743 248148 or email them here. Unless there are exceptional circumstances PCB Solicitors will usually limit our fees to match the employer's contribution.

PCB Solicitors will listen to you and seek the best possible settlement at what can be a very difficult time.

Our experts in the employment team can meet you to explain the settlement agreement process at one of our offices across Shropshire and Mid Wales in Shrewsbury, Telford, Church Stretton, Knighton, Ludlow or Craven Arms.


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