EMPLOYMENT LAW

Settlement Agreement Solicitors

A settlement agreement is a legally binding agreement between employer and employee which then prevents either party from suing the other in the future.

The significant features of a settlement agreement are:-

  • Legally binding – on employer and employee
  • Waive employee rights – they will often waive rights eg to bring an employment tribunal claim
  • Financial payment – there is normally some form of ‘compensation’ paid under the agreement due to ‘loss of office’
  • Negotiation – you do not have to accept the first offer made, and there is often a process of discussion between employee (their solicitor) and the employer to maximise the payment being made
  • Legal Advice – the employee must receive independent legal advice on the settlement agreement. Payment of the employment law solicitor’s fees is usually met by the employer
An employer pays for a settlement agreement

How much for a Settlement Agreement?

Your employer will usually pay the legal costs for you taking advice on your settlement agreement. So, it should be FREE of charge to you!

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Why do I need a Settlement Agreement?

The reason that a settlement agreement is being offered might be following any number of employment law issues including:-

What is a reasonable Settlement Agreement?

What is a reasonable settlement agreement depends entirely on your particular circumstances: your position; length of service; your contract of employment; perhaps your employers redundancy policy; and many other factors.  Our expert settlement agreement solicitors will advise you on an individual basis whether the financial element of your settlement agreement is fair or not.

What if I refuse a Settlement Agreement?

If you refuse a settlement agreement you are likely to also lose out on any financial package being offered by your employer.

Do I have to sign a Settlement Agreement?

To be legally binding, the settlement agreement must be:-

  • Employer signs
  • Employee signs
  • Solicitors certifies that they have advised the employee

Is a Settlement Agreement a good idea?

A settlement agreement creates a ‘clean break’ for both employees and employers and to that extent is often thought to be a good idea for all concerned.

Do I need a Settlement Agreement Solicitor?

As an employee, you must receive advice from an employment solicitor who must certify that they have advised you on the content and impact of the settlement agreement, and ‘sign off’ the settlement agreement to that effect.  Without that input from an employment lawyer, the settlement agreement will NOT be legally binding.

What’s the difference between a Compromise Agreement and a Settlement Agreement?

Compromise agreements were the old form of what is now called a settlement agreement.  Compromise agreements were often used with ‘problem’ employees when exiting them from a business, and to that end they had

How much does a Settlement Agreement cost?

An agreed settlement agreement (ie you do not require your solicitor to negotiate further on the terms being offered to you) is likely to be in the region of £250-£750 plus VAT depending on your circumstances (seniority, length of service, settlement figure).

A negotiated agreement (ie your settlement agreement solicitor is actively in negotiations with your employer obviously takes much more time, and this would be reflected in the cost.  Your employment law solicitor will agree any costs with you BEFORE you are committed to using their services.

Who pays for a Settlement Agreement?

The good news however is that, however much a settlement agreement costs, the solicitors fee is usually paid for by the employer!  So, to you as the employee, the cost of a settlement agreement should be zero/FREE!

Your solicitor will discuss and agree all of this upfront before you are committed to any legal fees.

How do I get my Settlement Agreement signed by a Solicitor?

With QLAW getting your settlement agreement signed off by one of our employment solicitors could not be easier.  Simply CLICK here, and then leave it to us.  We will need a digital copy of the agreement, ID for you, and contact details for your employer.  We arrange a zoom meeting to run through it with you.  And boom – done!  We can usually deal with it for you within 1 working day!

How long does it take to get a Settlement Agreement signed off?

We try to get everything done for you within 1-2 working days.  That (obviously) assumes that your settlement agreement is not contested, and so there will not be a need for us to be in negotiations with your employer.

How do I choose the best Settlement Agreement Solicitor?

When it comes to choosing a settlement agreement solicitor, we reckon some of the important things to think about include:-

  • Employment solicitor specialist
  • Solicitor Reviews – check out our Trustpilot reviews
  • Service levels – how long will it take to get your settlement agreement signed
  • Convenience – will you have the faff of things like getting copy passports to a solicitor? QLAW can offer you biometric ID on your mobile (like internet banking)
  • Settlement Agreement Solicitor near me – we reckon that convenience is now something quite different to being near to where you live or work. QLAW was one of the first ever fully paperless law firms (2008!) and we have embraced the very latest in IT ever since.  It means we can offer our employment law clients the epitome of convenience – wherever they are in the UK.

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Settlement Agreement FAQs

A settlement agreement is a legally binding agreement between employer and employee used when employment comes to an end and which protects both employer and employee from future action being brought by the other party. It provides a ‘clean break’. It is used in all sorts of situations including where there may be potential claims relating to: wrongful dismissal; redundancy; discrimination in the workplace; grievance procedures; disciplinary processes; bullying at work; sexual discrimination; misconduct; gross misconduct; performance issues and whistleblowing.

Settlement agreements (formerly called “compromise agreements”) can cover all manner of situations which lead to losing your job. Settlement agreements are commonly used to help clarify the terms agreed for ending an employment relationship. They are very much run of the mill, and simply considered good practice to protect both employee and employer when employment ends. Generally, they are used where there may be some potential for future dispute around matters such as: misconduct; gross misconduct; redundancy; harassment; bullying at work; whistleblowing; discrimination because of age, sex, disability, race, religion or belief or sexual orientation; performance issues; grievance procedures; and disciplinary processes.

As an employee, you are under no legal obligation to accept a settlement agreement from your employer. However, one of the usual terms of a settlement agreement is that the employer pays, or at least contributes to the fees for the employee to receive independent legal advice from an employment specialist solicitor who has nothing to do with the employer. Employees must get independent legal advice for the settlement agreement to be binding. This provides employees with a safety net of independent employment law advice to understand what they are agreeing to. If you refuse a settlement agreement, you will also forego the opportunity to have that free legal advice on your situation, so you can make an informed decision. We always advise on whether the offer is reasonable and appropriate in the circumstances and will talk to you about seeking to negotiate a better deal where appropriate (additional fees may apply if you want to negotiate, but we always look to have the employer pay as part of the deal).

Employers use settlement agreements for a number of reasons around issues of employment law. They are used to protect both employee and employer, not least because to be binding on both parties the employee must receive independent employment law advice from an employment law solicitor who is independent of the employer. The employer will usually pay or at least contribute to the fees for that independent employment law advice. With that and other requirements met, a settlement agreement will bind both parties and remove the opportunity for future claims. It therefore provides a ‘clean break’.

A settlement agreement is the only way by which an employee can validly waive any employment related claims they may have against their employer. Settlement agreements are intended to give a ‘clean break’ and draw a line under the relationship – ie the settlement agreement removes the option for the employee to sue the employer in the future. So, the answer is no – a settlement agreement is not the same as a dismissal. However, settlement agreements are used by employers and their HR advisors in many situations where there is an end to the employment.  This might include where there has been a dismissal or another sort of breakdown in relations for reasons like: redundancy; unfair dismissal; constructive dismissal; discrimination; performance issues; grievance process; disciplinary process; misconduct and gross misconduct. So, to that end, dismissal and a settlement agreement are closely linked!

No! A settlement agreement is not the same as redundancy. Redundancy is a reason for you losing your job. A settlement agreement is simply the ‘paperwork’ sometimes used around that loss of job. You may be asked to sign a settlement agreement by your employer if you are made redundant. Redundancy is a situation whereby your employer no longer has a requirement for someone to do the job you currently do, or needs fewer people to do it, so that your job is deemed to no longer exist. Your employer may be liable to make a payment of statutory redundancy pay (and other sums like notice pay) in relation to that loss of your job. If your employer is offering additional compensation, over the amounts they are obliged to pay you, it is pretty common for them to ask you to sign a settlement agreement in order to be paid that compensation. A settlement agreement is a legally binding agreement between employer and employee which creates a ‘clean break’ between them and requires you to give up your rights to bring claims against your employer. Settlement agreements are used in all sorts of situations – not just redundancy.

Although there is a common format that settlement agreements will follow, your settlement agreement could cover all manner of things. Sometimes, employer and employee will have negotiated agreed financial terms before a draft settlement agreement is issued to the employee to take to a solicitor.  Sometimes, a settlement agreement will be issued without discussion about the payments: the employee might just be told what they are being offered, and told to get legal advice. Discussions around a settlement agreement will be separate to a redundancy consultation process, or disciplinary process, which might continue alongside settlement agreement negotiations. The sorts of questions you might have regarding the terms included in your settlement agreement could include: have I been offered a reference? Will my settlement agreement legal fees be paid? How much will I be paid after my settlement agreement? What tax is payable on my settlement agreement? Are there any restrictive covenants in my settlement agreement? Will I be paid my bonus in my settlement agreement? What benefits will continue after my settlement agreement? What will be my termination date in my settlement agreement?  Who can I go to work for after signing my settlement agreement?  What are the restrictions on my future work after signing my settlement agreement?

In our experience, on average, solicitors charge from around £500 (+VAT) to advise on straightforward settlement agreements. The fee can change depending on the circumstances including how complex the terms are, and whether you want to try to negotiate a better deal. At least some of the fee payable to your own employment law solicitor will normally be paid by your employer. Fees for advising on settlement agreements will also vary depending on (for example) why you have lost your job.

If it turns out that you may be losing your job unlawfully, or you may have potential claims, your employment law solicitor will tell you this, and will explain the estimated fee if you decided you wanted to challenge your employer in relation to your loss of job, or seek a better compensation payment in return for signing the settlement agreement.  We are very experienced in negotiating exit deals, where for instance you have been selected for redundancy while pregnant or on maternity leave; where you have been offered a settlement agreement after raising a grievance; or where you have been threatened with performance improvement procedure if you do not accept a settlement agreement.

Employment law solicitors will generally have fees for advising an employee on settlement agreements from around £500 (+VAT) for a straightforward situation. If you are an employee needing advice on a settlement agreement, your employer should pay all or at least a contribution to the costs charged by your own employment law solicitor. This will be a term of the settlement agreement (ie that your employer will pay the costs of your own employment law solicitor). The fee can change depending on the circumstances including how complex the terms are, and whether you want to try to negotiate a better deal. At least some of the fee payable to your own employment law solicitor will normally be paid by your employer. Fees for advising on settlement agreements will also vary depending on (for example) why you have lost your job.

If it turns out that you may be losing your job unlawfully, or you may have potential claims, your employment law solicitor will tell you this, and will explain the estimated fee if you decided you wanted to challenge your employer in relation to your loss of job, or seek a better compensation payment in return for signing the settlement agreement.  We are very experienced in negotiating exit deals, where for instance you have been selected for redundancy while pregnant or on maternity leave; where you have been offered a settlement agreement after raising a grievance; or where you have been threatened with performance improvement procedure if you do not accept a settlement agreement.

No, unfortunately an employer does not have to pay all (or even a particular amount of) the employee’s fees incurred in obtaining independent legal advice in relation to their settlement agreement.  However, it is usual for an employer to pay all the employee’s fees, or at least a contribution to their fees, because the employee must get independent legal advice for the settlement agreement to be valid. As such, it’s to the employer’s benefit that they at least contribute to the employee’s costs of getting that advice.  We always try to maximise the employer’s contribution, even where our fees are higher because e.g. we are negotiating a better deal, to try to avoid your having to pay more than you absolutely have to.

How long does it take to negotiate a settlement agreement is unfortunately rather like asking how long is piece of string. If the reason for you losing your job is simple and accepted (for example, a redundancy where you are content with the payments offered, and have no other claims or complaints) then the whole process can be over in a matter of 1 to 2 weeks.

Where a settlement agreement tends to take longer is where you lost your job for reasons more complicated, and in particular if your employment law solicitor is trying to negotiate a better deal for you, and/or raises queries with your employer in relation to the other terms of your settlement agreement. The queries your settlement agreement solicitors may raise will include things such as: bullying at work; payments owing following dismissal; pension contributions; bonus payments; tax on your settlement agreement payment; and perhaps if you have been discriminated against – for example during a round of redundancy you were selected for redundancy for discriminatory reasons, such as being pregnant or on maternity leave.

The simple answer to this question is possibly yes, depending on the type of payment.  Settlement agreements usually set out several different payments, some of which are taxable and some may not be.  Any payment of contractual sums like notice pay, holiday pay, or a bonus, will be taxable as usual.  Only compensation for loss of employment up to £30,000 can be paid free of tax.  Compensation over £30,000 is subject to tax at your normal rate and National Insurance Contributions.  Notice pay, holiday pay, bonuses, and other contractual sums are not compensation.  We cannot provide tax advice, but can refer you to an independent tax adviser if required.

Yes, you do need an employment law solicitor for a settlement agreement! It is part of the legal requirements about executing settlement agreements that the employee receives legal advice from an independent employment law solicitor. The solicitor’s fee for advising the employee will normally be paid (or at least contributed to) by the employer. Without that independent advice being given, the settlement agreement will not be legally binding on the employer and employee.

An employee must take independent legal advice on the content of their settlement agreement in order for it to be legally binding on both employer and employee. If the employee does not take that independent legal advice (and they should do so from a specialist employment law solicitor), the settlement agreement will not become legally binding under the legal framework surrounding settlement agreements. This provision was built into the law to make sure that employers do not wrongly gain protection from future action brought by employees. The need to have received advice from an employment lawyer provides the employee who is receiving the settlement agreement with a ‘safety net’ and hopefully avoids rogue employers misusing settlement agreements to avoid future legal action in an employment tribunal (for example).

A settlement agreement gives certainty to both employer and employee when a job position comes to an end. It is a legally binding contract that means both employer and employee agree to a clean break, and can not thereafter being legal action (employment tribunal). As well as that clean break and certainty that a settlement agreement gives, it also provides employees with the knowledge that they must receive independent legal advice which must be paid for by the employer. This is designed to avoid rogue employers taking advantage of vulnerable employees. The sorts of areas that a settlement agreement will give certainty will include both the payments and terms being offered, and also in excluding future claims. So these employment law issues might include all manner of things including: payment in lieu of notice (PILON); holiday and sick pay; bonus payments; pension contributions; grievance process; disciplinary process; discrimination; performance; dismissal; and redundancy.

The point of a settlement agreement is to give certainty to both the employer and employee. It is a requirement of law that where a settlement agreement is signed the employee receives independent legal advice on the terms of the settlement agreement and the circumstances surrounding the ending of their employment. The employer will usually pay for, or at least contribute to fees for, that independent legal advice. Once a settlement agreement is in place and deemed legally valid, it provides a ‘clean break’ and means legal action in the future can not be taken (employment tribunal).

The payments that you receive under a settlement agreement will depend upon your particular circumstances, and of course why your employment is coming to an end. Your employment contract might define what payments fall due if you are made redundant, though this is rare nowadays. The things your contract of employment should define are things like holiday pay due, payments in lieu of notice (known as PILON), and bonus payments. Where payments are less predictable – or variable – under a settlement agreement may be where the end of your employment is questionable – particularly if your employer has treated you badly or even unlawfully (for example if they have bullied you). In those circumstances, employers may wish to ‘pay off’ employees with compensation to avoid future claims being brought in an employment tribunal.

Your employer will prepare the settlement agreement (or their employment solicitors). There is likely to be a period of ‘consultation’ with the employee ahead of the actual settlement agreement being drafted and presented to you. During that period of consultation, the main terms of the settlement agreement are likely to be agreed between employer and employee.

Yes, your employer can withdraw a Settlement Agreement at any point up to it being signed by them.

Typically, the employee will receive independent legal advice on the terms of the settlement agreement. The employee and their solicitor will both sign the settlement agreement. It will then go to the employer who will sign. Then, and only then, is the settlement agreement legally binding.

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