Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

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

Tagged with →  

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

Your name

Your email

Your telephone number

Contact us

Please feel free to discuss your own position and concerns. Contact your nearest office on:

T: 020 3397 3603
E: enquiries@redmans.co.uk
W: www.redmans.co.uk

Testimonials

4.70 Average

73 Reviews

Richard v

Excellent Service

Posted 6 days ago

Anonymous

Very happy from service received. Highly recommend

Posted 6 days ago

Colin W

Very professional and thorough. Sachs who dealt with the bulk of my case was excellent Thank you. .

Posted 6 days ago

Anonymous

I was generally impressed with the fast turn around, efficiency, responsiveness, and consideration of circumstances. I needed a couple of areas of advice quickly and with Redmans help was able to get to a conclusion quickly and with minimum stress. They were friendly and professional throughout - I'd use them again.

Posted 1 week ago

Anonymous

The guidance and assistance I recently received when using Redman's was fantastic. Caroline & Chris were both very informative and understanding walking me through each step. Thank you.

Posted 1 month ago

Nicola W

Fantastic service, very quick and efficient. Thank you

Posted 1 month ago

Anonymous

Excellent professional service.

Posted 1 month ago

Anonymous

As with All solicitors advice without consequence but understood and communicated my legal position

Posted 1 month ago

Anonymous

Prompt, professional and excellent service.

Posted 1 month ago

Dominic C

Excellent service, prompt and helpful

Posted 1 month ago

Anonymous

I found Redman’s to be very efficient and got me the best deal available in the short time scale that was available.

Posted 1 month ago

Victor L

Very professional. Provided excellent advice on my Settlement agreement.

Posted 1 month ago

Anonymous

Professional from start to finish.

Posted 1 month ago

Oliver W

Excellent service provided by Redmans, will certainly consider using again.

Posted 1 month ago

Melanie H

Very professional and extremely personable service. Thank you very much.

Posted 2 months ago

Anonymous

I found Chris to be very approachable and easy to speak with about complex matters. He took action quickly and his updates to me, as his client, were prompt. I would recommend Chris and the team at Redmans without hesitation.

Posted 2 months ago

Anonymous

Good advice

Posted 2 months ago

Anonymous

Overall happy with the service provided by Chris and Rana.

Posted 2 months ago

Anonymous

Chris and Rana provide a great service, very informed, diligent and care about your result, would recommend Redmans

Posted 2 months ago

David W

A speedy efficient friendly service, I would definitely recommend Redmans Solicitors for processing Settlement Agreements.

Posted 2 months ago

Anonymous

Both Rana and Chris were fantastic. From the first phone call I was confident my matter was in good hands. I was not disappointed. I would highly recommend Redmans. Thank you again for all of your support and advice.

Posted 2 months ago