Settlement Agreements - The Key Points

What is a Settlement Agreement?

Previously called a Compromise Agreement, a Settlement agreement is a legally binding document mainly used to end the employment contract between the employee and employer. In essence, you settle any claims you may have with your employer in exchange for a financial sum which often ends your employment. Settlement Agreements can also be used to settle potential Employment Tribunal cases.

Once a Settlement Agreement has been finalised it waives the employee rights to bring a future claim covered by the agreement to an Employment Tribunal.

Key points to a Settlement Agreement

·        The agreement must be in writing

·        They are voluntary

·        They can be offered at any stage of employment

What does a Settlement Agreement cover?

Every settlement agreement is different but there are a number of things that are usually covered within all Settlement Agreements. The main points will be:

·        The amount of financial compensation to be paid

·        Specify any tax repercussion for the financial payment

·        Deal with holiday pay, bonuses, remaining salary payment, notice periods and redundancy payments

·        Clear guidance on your ability to seek future employment with competitors or similar job roles within other organisations

How long will it take to finalise a Settlement Agreement?

Once you have been offered a Settlement Agreement you should expect a reasonable amount of time to consider to proposed conditions of the agreement. The ACAS Code of Practice on settlement agreements specifies a minimum of 10 calendar days unless the parties agree otherwise. This will allow you time to seek independent legal advice. From there your Solicitor will be able to deal with your matter and provide a smooth and efficient service to finalise it as fast as possible.

Do I need legal advice for a Settlement Agreement?

Yes, Settlement Agreements are not legally effective unless the employee has received independent legal advice.

Seeking legal advice as soon as you are offered a Settlement Agreement is vital. Specialist Solicitors can help you decide whether or not to accept the Settlement or if it is appropriate for negotiations to begin with the Employer.

A Solicitor will ensure you gain a complete understanding of the terms within the agreement and how they may affect you.

Getting expert legal advice will ensure you get the best settlement possible.

How much will it cost?

As the agreement cannot be finalised until the employee has received legal advice it is usual practice that any legal costs incurred by the employee relating to the Settlement Agreement are paid for by the employer. Therefor the employee should not have any costs to pay unless they require any extra legal advice or negotiations to take place.

How can we help? 

 At Pinkney Grunwells, we can provide the independent legal advice you need prior to signing. Our team’s breadth and depth of knowledge is second to none and we will guide you from start to finish supporting you every step of the way through what can be a very daunting experience.