A settlement agreement (which used to be known as a compromise agreement) is an agreement made between an employer and an employee. The agreement is basically that in return for a sum of money the employee will leave the employment and give up all their rights to bring a claim at an employment tribunal.
It is a legal requirement that the employee receives independent legal advice prior to signing the settlement agreement. Most settlement agreements include a clause where the employer will make a contribution towards the employee’s legal expenses in obtaining this independent advice. This normally means you, the employee, will not need to make any payment from your own pocket.
A settlement agreement is a legally binding agreement between you and your employer which means that you waive the right to take any dispute to an employment tribunal.
Normally, the employer agrees to pay you a sum of money in return for agreeing to waive this right, although there may be (and often are) other conditions attached such as clauses preventing you from talking to the media or any other third party. As such, you should have your compromise agreement scrutinised by an independent solicitor. The cost of having a solicitor scrutinise the agreement is often met by your employer.
If your relationship with your employer has broken down, or even if both parties want to end the employment contract on an amicable basis and the possibility of going to an employment tribunal exists, your employer may instead offer to ‘compromise’ and pay you a sum of money upfront instead of going through the tribunal process.
Finally, settlement agreements must be ‘bespoke’ – they must apply to your situation and yours alone. Your employer cannot use a ‘one-size-fits-all’ agreement for every dispute. Again, this is why it is important to have a solicitor overlook the agreement before you sign it.
We advise employees on their settlement agreement and whether they are receiving a fair deal in return for leaving employment.
We also advise employers on how to approach employees to whom they wish to offer a settlement agreement.
If you require help with a settlement agreement, call us on 0141 576 4808 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it.
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