Settlements agreements

What is a Settlement Agreement?

Settlement agreements (formerly called compromise agreements) are legally binding agreements that set out the full terms of an agreement between an employer and employee, whereby an employee agrees to sign away their rights to bring a claim against their employer in return for a cash sum.

Settlement or Compromise Agreements are generally offered to employees when a dispute in the workplace arises, a redundancy process is being undertaken or when employee misconduct is alleged.  They can also be used when settling potential or actual Employment Tribunal Claims.

What are the common terms of a Settlement Agreement?

A well written Settlement or Compromise Agreement will include:

  • A tax free compensation sum payable to the employee (up to a maximum of £30,000)
  • Confidentiality
  • Signing away of employment rights by the employee
  • A financial contribution towards the employee’s legal fees in obtaining advice on the agreement
  • The requirement for an independent Solicitor to sign the agreement confirming that they have advised the employee on the terms of the agreement.

How much does it cost?

An employer routinely contributes towards an employees’ legal costs in obtaining advice on a Settlement or Compromise Agreement and therefore with our fixed fee prices starting from as little as £250 plus VAT, we are able to offer most employee clients a completely free service.

This means that as an employee, you will receive free, independent and impartial legal advice that doesn’t cost you a penny.  We send our invoice directly to the employer.

Only if substantial negotiations on sums and/or terms are required will an employee potentially be required to contribute towards their legal fees, but we will always first try and increase an employer’s contribution towards an employee’s legal fees where this is required.  Where it is not possible to obtain such an increase, we will offer you a reasonable fixed fee for any such work, taking into account your personal circumstances.

Why do I need your help?

You will need to have your Settlement or Compromise Agreement signed off by a solicitor in order for it to be legally binding.  However, the service we offer encompasses many potential advantages for employees entering into settlement agreements, including ensuring that you are getting a good deal, advising you of any potential claims you have or could have against your employer (such as unfair dismissal or discrimination) and the compensation you would likely receive if you were to bring a Claim, informing you fully of the potential effect of the terms of the agreement, above and beyond their ‘face value’, so as to ensure that you are completely aware of what you are getting yourself into, advising you of any ‘hidden traps’ or post-termination restrictions, making sure you are aware of any potential tax implications of entering into the agreement and, where required, negotiating an uplift in the compensation on offer using our lawyers practical, experienced and savvy negotiation skills to get you the very best deal.

I am an employer – can I instruction you to draft a Settlement Agreement for my business?

Put simply, yes!  We are experts in all matters involving settlement agreements including the drafting, negotiation and enforcement of the same.  We are commercially minded and can ensure that the agreement we draft for you protects your business completely.  We offer advice on potential claims from an employee, when and whether to offer settlement agreements and how such discussions should be undertaken so as to prevent potentially costly claims.

What do I do next?

If you would like to have a discussion regarding settlement agreements, or any other employment or workplace issue, please give us a call for a confidential no charge telephone consultation.

Email Lloyd Clarke for a FREE initial no obligation chat.