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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

    4.79 Average

    273 Reviews

    Mark M

    I found Redmans very easy to work with. Mel was very responsive, her advice led to an improved settlement. . Recommended.!

    Posted 2 days ago

    Anonymous

    Fantastic service. I would recommend Redmans to anyone who needed a Solicitor. The communication was second to none and consistent clear guidance was given.

    Posted 4 days ago

    Anonymous

    Everyone I dealt with at Redmans were professional, empathetic & always responded promptly and helped make the transition as smooth & efficient as possible for me. If you need legal advice, don’t hesitate & contact the team.

    Posted 6 days ago

    Anonymous

    Sacha was incredibly helpful and professional. Timely and accurate advice at a time I most needed it. I was extremely impressed and grateful.

    Posted 6 days ago

    Sue W

    The people at Redmans talk to you with respect and make you feel like they take your situation personal. They clearly care and are extremely professional. I have recommended Redmans to many people.

    Posted 3 weeks ago

    Anonymous

    Redmans Solicitors were consistently prompt, efficient and professional from the start of my reaching out to them for support in relation to contentious negotiations of an employment matter that continued for almost two months resulting in a positive settlement agreement. Chris Hadrill was diligent, thorough, empathetic and objective in his advice and guidance, showing deep and broad knowledge of the law and legal processes plus extensive practical experience in handling complex matters, resulting in clear and pragmatic advice in ambiguous circumstances that resulted in a very good outcome. I fully recommend Chris Hadrill and Redmans Solicitors! I have made this review anonymous purely because of the confidentiality obligations in the settlement agreement concluded.

    Posted 1 month ago

    Michelle W

    Redmans solicitors provided legal support and advice for a settlement agreement. Excellent customer service, very professional. The senior associate solicitor kept me updated throughout the process, showed empathy and the agreement was signed-off / completed within the agreed timeline.

    Posted 1 month ago

    Mark W

    Redmans Solicitors were extremely professional and helpful! Chris Hadrill handled my case and was an amazing help! His guidance, advice and understanding to my redundancy settlement were always clear, concise and very helpful and I am very grateful to him, and glad I found Redmans to help with my settlement. I highly recommend them!

    Posted 1 month ago

    Alison M

    Very happy with the advice I received

    Posted 2 months ago

    Margaret A

    I found everything about the company to be extremely professional and efficient. During my initial contact with Chris, he listened well and was reassuring, so I felt confident that my case would be well handled. Caroline was excellent at explaining all the legal points and answering my questions, as well as being very supportive and understanding throughout the process. I would definitely recommend this company.

    Posted 2 months ago

    Sanja K

    Very efficient and professional service.

    Posted 2 months ago

    Anonymous

    I found the advice I was given by Redmans Solicitors to be clear and useful and found the solicitor on my case to be both knowledgeable and approachable.

    Posted 2 months ago

    Karen T

    Great service. Thank you.

    Posted 2 months ago

    Anonymous

    Excellent service from Chris & Mel Chin. The best outcome was achieved from the redundancy process. They were extremely thorough, listened carefully and acted swiftly on my behalf. I highly recommend Redmans Solicitors

    Posted 2 months ago

    Shanine M

    Excellent service, thank you so much!

    Posted 2 months ago

    Anonymous

    I found Caroline and Chris very Helpful and provided excellent service. Caroline especially provided great legal advice and made me feel at ease with the whole process. I would highly recommend them. Thank you!

    Posted 2 months ago

    Gayle B

    Excellent company very professional would definitely recommend

    Posted 2 months ago

    Alex K

    Redmans provided an excellent service, timely and effective. Will definitely recommend.

    Posted 2 months ago

    Anonymous

    Great job done on my employment law

    Posted 2 months ago

    Dominica S

    Caroline & Chris were very prompt and efficient.Very happy with the service and will definitely recommend Redmans Solicitor to everyone !

    Posted 2 months ago

    Sandra K

    If you are looking for a group of solicitors who are Professional, Caring and on point, then look no futher than Redmans. I was literally hand held through out my case. Can not find fault with this company, very happy with the result and the service i received. Would highly recommend Redmans.

    Posted 2 months ago