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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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    370 Reviews

    Glyn B

    Provided a great service, covered all my requirements

    Posted 6 hours ago

    Fidel A

    Redmans Solicitors recently helped me navigate a recent employment termination settlement agreement. Chris Hadrill is very professional and you will be in good hands with him. I score Redmans 4 out of 5 because things had to move fast and felt the team member assigned to my case wasn't very responsive at times. Having said that, I was very happy with the outcome and have no hesitation in recommending their services.

    Posted 23 hours ago

    Nigel A

    Chris Hadrill is hugely impressive - the right blend of assured calm and savvy professionalism. I've already recommended him to friends and family.

    Posted 1 day ago

    Matt O

    I was hugely impressed with the ease of being able to work with Redmans Solicitors and their professional approach. Mel was really clear around the process, and costings required and I felt comfortable throughout. I would certainly recommend.

    Posted 1 day ago

    Bryan G

    Great response, and also happy to assist

    Posted 1 day ago

    David L

    I was made a settlement offer by my employer to terminate my emplyment early. Redmans helped me understand the offer, and ensured that it was fair for someone in my position. They made a very stressful situation much easier. Excellent service.

    Posted 2 days ago


    I can highly recommend Redmans. The service was professional and prompt and I would not hesitate to use them again. Thanks

    Posted 1 week ago


    Overall I am satisfied with the performance from Redmans. The reason I have given 4 stars is that I had quite a lot difficulty in contacting the representative which was initially nominated for me. However, when I contacted Chris instead, he was excellent over the phone and secured a great outcome in short order. I would recommend Redmans Solicitors.

    Posted 1 week ago


    Chris and Redmans were a great help. Effective and efficient, quick response from my first enquiry and then straightforward and attentive throughout with ultimately a positive outcome. I will use them again and recommend them.

    Posted 1 week ago

    Marie P

    Great service, quick responses, good advice and all in a no nonsense, no jargon manner. Would definitely recommend.

    Posted 2 weeks ago


    Rana was amazingly thorough and professional!

    Posted 2 weeks ago


    I am extremely happy with the legal advice I was provided with. My case was resolved to the best of my expectations. Thank you very much for your professional help.

    Posted 2 weeks ago

    Shahzad R

    Chris and his team were excellent. They provided sound advice and consultation that resulted in more cash than was offered. Would definitely recommend.

    Posted 2 weeks ago

    Sanjay B

    I would like to take this opportunity to thank Mel Chin, for all her support during my settlement process. Where she provided a professional service and was understanding. I would confidently recommend Redmans Solicitors to my friends and family. Thank you and wishing you all a Merry Christmas.

    Posted 4 weeks ago

    Paul O

    Excellent response time and communication during my dealings with Redmans

    Posted 1 month ago

    Gil T

    I don’t normally write reviews, but thought it was time on this occasion. Just wanted to say that I highly recommend Redmans - especially Rana Tandon, who helped me navigate around my employment contract. Rana was meticulous and thorough and all over my needs. Would I use Redmans again ? ..absolutely

    Posted 1 month ago

    Stephanie D

    Very thorough and professional service. I was very nervous about my employment case, as I had never dealt with anything like it before. However, the solicitors who handled my case made sure I understood everything. I was never kept in the dark and Redmans kept me constantly informed about what was going on with my case. I would definitely recommend Redmans Solicitors

    Posted 1 month ago

    Richard S

    Chris and Sacha were great throughout the entire process. Chris was very helpful once the initial discussions with my company began and before we agreed there was a case. Sacha was very responsive, patient and helpful throughout ensuring I felt I had the right information to make the best decision on next steps. A close friend and wife have both used Redmans in the past few years for unfair dismissals and the service continues to be first-class and I would strongly recommend them again. They definitely help reduce the anxiety that comes with uncertainty around new processes and situations. Thank you!

    Posted 1 month ago


    Very nice and patient went through the whole document with me.

    Posted 1 month ago

    Susan L

    Very helpful and led me through the redundancy process.

    Posted 1 month ago


    I was very impressed with the service that I received, and the speed in which it was handled. I would recommend them to a family member

    Posted 1 month ago