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FAQs: Settlement Agreements for Employees

Our expert Settlement Agreement solicitors answer some common questions from employees who are offered Settlement Agreements by their employer.

  1. What does “without prejudice” mean?
  2. What is a protected conversation?
  3. How long do you have to decide whether you want to accept the Settlement Agreement?
  4. Do you need a solicitor?
  5. What should you expect from your solicitor?
  6. What is a fair settlement offer?
  7. How much will it cost you to seek legal advice?
  8. Why are you being asked to sign a Settlement Agreement?
  9. Can you tell anyone about the Settlement Agreement?
  10. Can you pick your reason for leaving?
  11. Can your notice be paid tax-free?
  12. Can your employer impose new post-termination obligations?
  13. What happens if your employer breaches the Settlement Agreement?
  14. What can you expect from your solicitor?
  15. How long does it take to negotiate a Settlement Agreement?

What does “without prejudice” mean?

The “without prejudice” rule allows you and your employer to speak and write openly about settlement terms without compromising your case or their defence. This also means that these negotiations are confidential unless you and your employer agree that they are not.

What is a protected conversation?

A “protected conversation” allows you and your employer to have confidential pre-termination settlement discussions without either of you being able to use the discussions against the other in any subsequent unfair dismissal proceedings. This protection only applies to ordinary unfair dismissal claims and not other claims such as discrimination. Your employer will lose this protection if they behave improperly in the conversation, for instance, by putting undue pressure on you to sign.

How long do you have to decide whether you want to accept the Settlement Agreement?

According to Acas guidance, employers should give an employee a minimum of 10 calendar days to decide whether they want to accept a Settlement Agreement. Your employer should not demand that the Agreement be signed straight away. This may be seen to be undue pressure and could be used to show that your employer has acted improperly.

Do you need a solicitor?

The law says you can’t sign a Settlement Agreement without having taken the advice of a qualified lawyer, certified trade union official or advice centre worker. All of these advisers must be covered by indemnity insurance and should be specialists in Settlement Agreements.

What should you expect from your solicitor?

Your Settlement Agreement solicitor will explore with you the background to you being offered this Settlement Agreement. We will advise you whether you are being offered a suitable amount of compensation. Your solicitor should refer to your contract of employment to calculate the correct notice and see if the compensatory sum covers an appropriate amount. If any bonuses are due, your solicitor should look at this and also work out any appropriate redundancy payments. Much of the Settlement Agreement is written in legalistic language and refers to various issues that can look confusing to those without legal training. It is important that your solicitor explains the legal ramifications of signing a Settlement Agreement including the legal warranties you are entering into, such as a confidentiality clause, and the penalties for breaking any of these warranties.

What is a fair settlement offer?

This will depend on the circumstances surrounding the offer of the Settlement Agreement. We would go through the background with you to find out what potential claims you may have against your employer, how strong they appear to be, and how much they may be worth. This is in order to establish whether the sum offered compensates you sufficiently for the legal rights that you are giving up. Another consideration in deciding whether to accept an offer is how quickly you think you will find another job. This is because any compensation that you might receive in an Employment Tribunal would be based on your actual loss of earnings.

How much will it cost you to seek legal advice?

Your Settlement Agreement should normally cover the amount that it would cost for a solicitor to sign it off – usually £350.00 to £500.00 + VAT. This is normally sufficient for a simple sign off but not for detailed advice or negotiations. If there are issues still to be determined and the amount offered is inadequate then your solicitor should try not only to increase the compensation, but also your employer’s contribution for the additional legal advice. Obviously, if your solicitor is negotiating a higher settlement then this is usually something that your employer expects you to pay for yourself.

Why are you being asked to sign a Settlement Agreement?

When you sign a Settlement Agreement and accept its terms, you lose your right to make a claim against your employer in a Court or an Employment Tribunal. This means you should resolve all issues within the Settlement Agreement, including any bonuses due and accrued but untaken holiday. The only exception to this is where your employer offers a Settlement Agreement but has misrepresented the facts to you and the circumstances as to why they want you to sign it. For example, they have told you that your job is redundant when it is not and you have evidence that you have been replaced. This is called “fraudulent misrepresentation”.

Can you tell anyone about the Settlement Agreement?

Nearly all Settlement Agreements include a standard confidentiality agreement. Sometimes this only covers the terms of the amount offered in the Agreement. However, in some cases it covers the existence of a Settlement Agreement which means you must not tell anyone that this is the way in which you have agreed to terminate your contract. Usually you can agree exceptions to this rule so it does not apply to immediate family, spouse and professional advisers. Where people are aware that you have a dispute or claim against your employer, it is important to look at what sort of confidentiality agreement has been offered to see if this is appropriate.

Can you pick your reason for leaving?

The Settlement Agreement is confidential and you will not be able to disclose its terms to any third parties except for the normal exceptions which include your immediate family, professional advisers, insurers and HMRC. If there is a genuine redundancy situation, or there is a possibility of a redundancy situation, you may be able to ask your employer to specify the reason for leaving as redundancy. This may then be disclosed to your mortgage company for the purpose of being able to make a claim on your mortgage protection insurance policy.

Can your notice pay be paid tax-free?


Can your employer impose new post-termination obligations?

These can be introduced in a Settlement Agreement. However your employer should provide a separate payment for any new restrictive covenants. Whether they are enforceable will depend on whether they are reasonable and whether your employer has a legitimate business interest to protect.

What happens if your employer breaches the Settlement Agreement?

If your employer breaches any terms of your Settlement Agreement you need to contact your solicitor who signed this off. If your former employer has not paid any of your compensation then you will be able to enforce the payment terms. The remedy for other breaches will depend on what type of breach there has been and the evidence you have to support your claim that there have been serious breaches.

What can you expect from your solicitor?

Your solicitor should advise you as to whether entering into the Settlement Agreement is the best outcome for you. If it is not they may need to help you draft a formal grievance and put forward a larger counter offer than the amount of compensation already suggested. They will check the warranties are reasonable and advise you as to whether any further tax is due from you.

It is important that you instruct a specialist employment law solicitor. They should have experience of running Tribunal cases so that they provide expert advice so you can make an informed choice about whether to accept this Settlement Agreement, or not.

How long does it take to negotiate a Settlement Agreement?

This depends on how straightforward the issues are. If the compensatory sum is generous and over and above your statutory and contractual rights, we can finalise your Settlement Agreement within days.

If we advise that changes need to be made to the wording of the Settlement Agreement, this needs to be sent to your employer and we are dependent on the speed of their response.

If the amount offered is clearly insufficient, then we can go back to your employer to negotiate more money. In many cases we advise that you raise a formal grievance to put pressure on your employer. The timescale will then depend on the reasonableness of your employer in increasing your compensation.

Only you can decide whether you wish to sign the Settlement Agreement for a lesser sum, or whether you want to hold out so that we can increase your compensation or make sure that all your contractual rights have been included, such as bonus, pension contributions, car allowance, etc.

For specialist Employment Law advice on whether to accept your Settlement Agreement, contact us on01273 609911, or email

Martin Searle Solicitors, 9 Marlborough Place, Brighton, BN1 1UB
T: 01273 609 991

Martin Searle Solicitors is the trading name of ms solicitors ltd, which is authorised and regulated by the Solicitors Regulation Authority, and is registered in England under company number 05067303.

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