Settlement Agreements

Settlement Agreements replaced Compromise Agreements. They essentially have the same purpose, being used to settle employment disputes. Importantly, however the introduction of Settlement Agreements brought about some ‘employer friendly’ differences. In summary, a party (which will normally be the employer) is permitted to discuss confidentially, terminating the employment. This tactic is explained below.


In order for settlement agreements to be enforceable, the employee must take independent legal advice which the employer normally pays for, subject to receiving a signed agreement. The employer normally sets a cap on the amount that they are prepared to contribute towards the employee’s legal advice, the minimum amount would normally be around £250.00.

settlement agreement discussions

The Agreement

Settlement agreements will contain certain important clauses to include the employee’s agreement to waive all claims; the employee will agree to keep the settlement agreement discussions confidential, and not to make derogatory comments about the employer, or any of their employees including on social media. The agreement will require some ‘consideration’ such as an agreed reference and/or payment. Any settlement agreement payment will vary depending upon the particular circumstances. In summary settlement agreements draw a clean line for both parties.

settlement agreements employers

Off Record Settlement Agreement Discussions

Discussions leading to the signing of a settlement agreement will arise from a variety of workplace situations. One of the settlement agreement changes introduced allows employers to have ‘off the record’ pre-termination discussions with their employees to attempt to negotiate the termination of the employment. Such discussions may appeal to employers looking to avoid carrying out a lengthy disciplinary/capability or redundancy procedure and/or the risk of a tribunal claim. In our experience around 95% of such discussions conclude with the employee leaving the employment via a settlement agreement. However, for the discussions to remain ‘inadmissible’ they must be brought and carried out in specified circumstances.

We have significant experience of successfully advising employers on negotiating settlement agreements including ‘off the record’ settlement discussions, leading to a successful settlement agreement.

For further information on this topic or our retained employment law service contact our team on 01625 87 4400