Settlement Agreements

Article by Ramzan Sharif – Solicitor at Fountain Solicitors, Walsall

A Settlement Agreement is a legally binding agreement between you and your employer. This usually provides for a severance payment by the employer in return for your agreement not to pursue any claims in a Tribunal or a Court. The employer will usually require you to keep the terms, for example the amount and the surrounding circumstances of your contract’s termination, confidential.

Why do I need a solicitor?

An agreement whereby you waive your rights to bring an employment claim can only be recognised in law if a solicitor signs it off.

Fountain Solicitors can advise you on the merits of your settlement agreement.

Fountain Solicitors will also identify any discrimination against you of which you might not be aware. For example, you might be disabled and protected by the Equality Act and therefore entitled to reasonable adjustments before any dismissal can take place. In these cases, there will not only be an unfair dismissal claim, but also an amount awarded for injury to feelings.

Why do employers use Settlement Agreements?

Employers will offer a Settlement Agreement when they want to terminate a contract on terms mutually agreed with you. This is so that there is a clean break with no opportunity for you to take them to court or a tribunal for more money.

There is a range of scenarios in which Settlement Agreements are used. They usually apply where the employer does not want to follow what could be a long, drawn-out process, such as a performance review or a full redundancy process, before being able to terminate.

Can I refer to a Settlement Agreement being offered to me if I reject the offer?

If you have a potential claim for any type of discrimination due to a “protected characteristic” – such as age, disability, maternity, pregnancy, race, religion or belief, sex, or sexual orientation – or claims for automatic unfair dismissal such as whistleblowing or for raising health and safety issues then these “off the record” conversations and documents can be brought to the attention of an Employment Tribunal.

What are the usual payments?

The Settlement Agreement will state the full breakdown of payments due to you and also whether any sums will be paid free of tax. A payment of up to £30,000 compensation can be paid without tax being deducted if it is an ex-gratia payment (compensatory rather than contractual payment).

Notice payment

The Settlement Agreement will deal with your notice payment if this is not going to be worked. If you have no contract or your contract does not contain a provision that refers to your employer being able to make a payment in lieu of notice, then your employer could pay your notice as a gross amount. There is no additional cost to your employer as this money would otherwise have been paid to HM Revenue and Customs.

Is the amount of money offered by your employer fair?

Fountain Solicitors will look at the different sums offered to you in your Settlement Agreement and advise you if it is a good deal. This will be based on the facts relating to the employer’s wish to terminate your contract.

Where the amounts offered are satisfactory, or where you instruct the solicitor to proceed despite the fact you could obtain more in a Tribunal or Court, your solicitor will sign off the Settlement Agreement to ensure a speedy payment.

Fountain Solicitors will advise you fully on all the implications of signing the Settlement Agreement and will endeavour to ensure you obtain a sum that represents the strength of your potential claims together with a reference.

Contact us on 01922 645 429 or email for a FREE consultation.

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