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Chris Hadrill, a specialist employment solicitor at Redmans, explains what settlement agreements are and why employers offer them to employees.

Settlement agreements: what are they?

Settlement agreements are a type of contract that is used to settle actual or potential claims that employees may have against their employer arising out of their employment or the termination of their employment; they are also sometimes (in rare cases) used by employers to also settle potential claims that they could have against current or former employees.

Settlement agreements normally contain a reasonably standard set of obligations on the part of both the employer and the employee, as follows (please note that this is not an exhaustive list but details the most common types of obligation):

  • An agreement as to how the employee’s notice period and outstanding holiday pay will be dealt with;
  • The payment by the employer of an agreed amount of ex-gratia compensation for loss of employment to the employee (which can be tax-free up to a maximum of £30,000);
  • The provision by the employer of an agreed form of reference; and
  • In return, the employee’s agreement that they are agreeing not to pursue the employer for certain types of claim (normally any and all statutory, contractual and tortious claims, save for an excepted few)

Why do employers offer settlement agreements?

In my experience most settlement agreements are used by employers to settle potential claims for unfair dismissal by employees arising from the following types of situations:

  • An ongoing or concluded redundancy process
  • An ongoing or concluded performance improvement process
  • Where there has been a breakdown in trust and confidence between the employer and the employee
  • Where there have been allegations of misconduct made by an employer against an employee
  • In settlement of an Employment Tribunal claim threatened or brought by an employee

There can be many reasons why employers offer settlement agreements to employees – some of these are detailed and explored below. Settlement agreements are often used in the following circumstances:

  • As standard practice by the Human Resources team at an employer;
  • To set out the terms of departure with certainty;
  • To ensure a departing employee’s ongoing cooperation and assistance after they leave their employment;
  • To settle threatened or issued Employment Tribunal claims

If you’re unsure as to the reason why you’ve been given a settlement agreement then you should seek legal advice on the terms of the agreement and discuss with your legal adviser why you think you’ve been offered the agreement – your legal adviser may be able to help you shed some light on why you’ve been offered the agreement (or make enquiries with your employer to find out). However, in the absence of specific information one way or the other I generally find that it is important not to speculate about the reasons why a client has been offered a settlement agreement, as this can distract from the task of advising on the terms.

Obtaining specialist legal advice on your settlement agreement

If you’ve been offered a settlement agreement by your employer then you should obtain specialist advice from a legal adviser, such as a specialist employment solicitor, on the terms and effect of the agreement – you should generally try to obtain advice as soon as possible as employers normally set a deadline for the completion of the agreement.

About Chris Hadrill

Chris is a specialist employment lawyer at Redmans. He specialises in contentious and non-contentious employment matters, including breach of contract claims, compromise agreements and Employment Tribunal cases. He writes on employment law matters on a variety of websites, including Direct 2 Lawyers, Lawontheweb.co.uk, LegalVoice, the Justice Gap and his own blog. Contact Chris by emailing him at chadrill@redmans.co.uk

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Testimonials

4.62 Average

39 Reviews

Katelyn

The solicitor communicated well with me and made sure I understood everything. He did everything needed for my settlement agreement and tried to get the wording changed in my favour too.

Posted 3 days ago

Anonymous

Redmans provided excellent services

Posted 3 days ago

Sibel U

Excellent service

Posted 3 days ago

Peter S

I was very happy with the level of advise I received from Caroline Lewis, and a very professional service fron Chris, The advice given really helped me and I was comfortable to sign the settlement agreement following my redundancy. I would be more than happy to recommend your services to others.

Posted 3 days ago

Derek S

I very much appreciated the help provided by Redmans in the settlement agreement agreed with my former employer.

Posted 4 days ago

Waseem M

It was the first ime I used Redmans Solicitors and to be honest, thety were amazing. Rana Tandon and Chris Hadrill were out of this world. They made the process as simply and smooth as can be. Thank you so much for all your support over the last week.

Posted 2 weeks ago

Anonymous

Worked very quickly considering right deadlines - and gave great advice

Posted 2 weeks ago

Anonymous

Redmans provided me with excellent advice at a very stressful time. The calm, confident and extremely professional manner in which my solicitor handled my case made the issue much easier to deal with and I was very impressed with the level of service I received.

Posted 2 weeks ago

Anonymous

Immediate response to my initial enquiry. Very clear throughout the whole process and thorough and great communication which worked really well during quite a stressful time. Chris Hadrill was extremely helpful and made me feel at ease.

Posted 3 months ago

Nick D

I received a very professional service from Chris. The advice given really helped to leave me comfortable to sign the settlement agreement following my redundancy. Would be happy to recommend your services to others.

Posted 3 months ago

Anonymous

Excellent service from initial contact to deliverables.

Posted 4 months ago

Virginia K

Yes, Chris Hadrill answered all my questions and I feel more confident with my current situation

Posted 4 months ago

Anonymous

Chris Hadrill was referred to me my a friend of mine. I found the service to be efficient, quick and like Chris's direct approach to my work. Well done and thank you Chris!

Posted 4 months ago

Andy W

Very prompt & structured service that helped put my mind at rest at a difficult time

Posted 4 months ago

Anonymous

I have found Redmans to be very helpful, diligant and thoroughly professional when dealing with them, plus they gone that extra mile for me !

Posted 4 months ago

Anonymous

Thank you to Chris Hadrill at Redmans for his assistance in settling my case. I contacted him at the very last minute and he was happy to help me and managed to get everything done on time and in a very professional manner. I will definitely be happy to work with him again .

Posted 4 months ago

Redman's provided excellent legal employment advice for me during a difficult time in my employment. Chris was my lawyer, super efficient, quick, reliable and clearly very experienced in the matter. Could not ask for a better law firm to deal with your query if you are in need of some help. Would definitely use them again in the future. Highly recommending Chris.

Posted 8 months ago

Steven

Chris Hadrill was very professional and responsive. I would highly recommend him

Posted 8 months ago

Dinah

Very Efficient, with very quick email reply’s. I had a matter that needed resolving within a very short space of time and Redmans Solicitors were great with dealing with my matter quickly.

Posted 8 months ago

Ankar

At Redmans the solicitor that was dealing with me was Chris. He dealt with my situation smoothly with clear guidance and explanation

Posted 8 months ago

Anonymous

Clear, concise advice and guidance delivered by an experienced and very capable solicitor, within the timelines required

Posted 9 months ago