Making a Settlement Agreement With Your Employer

Making a Settlement Agreement With Your Employer

If you’re in a position where you have a serious complaint against your employer, one option you might consider before taking the matter to an employment tribunal is to enter into a settlement agreement. Employers often choose this route to resolve a dispute quickly and quietly, preventing it from escalating into a formal claim.

This approach can offer employees a more straightforward resolution without the need for lengthy and potentially stressful legal proceedings. It’s a practical solution, aiming to address and settle grievances in a manner agreeable to both the employer and the employee.

In this article, our professional civil litigation lawyers will help you understand the settlement agreement and the process of an employment claim. Let’s get started.

What is a Settlement Agreement?

A settlement agreement is a legally binding contract mutually agreed upon by a job holder and their employer. Essentially, it’s a formalised way of concluding that an employment relationship is ending or resolving a dispute within the existing employment. 

Typically, these agreements include financial compensation, but they can also encompass other non-monetary benefits, such as a positive reference from your employer. The terms are tailored to ensure that your departure or dispute resolution is as favourable as possible under the circumstances.

One of the key advantages of opting for a settlement agreement is avoiding the often lengthy, expensive, and stressful process of an employment tribunal. It allows for a more direct and controlled approach to resolving employment disputes, offering a clear and often more immediate and amicable resolution.

Financial and Non-financial Terms in a Settlement Agreement

Financial Terms

The financial settlement agreement terms often include the following:

  1. Termination Payments: This may include an ex gratia payment, a sum given voluntarily by the employer, often as a gesture of goodwill.
  2. Payment in Lieu of Notice: If your contract is terminated without the standard notice period, this payment compensates for that notice period.
  3. Contractual Payments: These are payments you are entitled to up until your employment ends, including your regular salary.
  4. Bonus or Share Scheme Arrangements: Provisions for any bonuses, shares, or long-term incentive plans you might be part of.
  5. Compensation for New Clauses: If new confidentiality clauses or post-termination restrictions are added, additional sums may be negotiated as compensation.
  6. Settlement of Potential Claims: The agreement might also cover any statutory or contractual claims arising from your employment.

Non-Financial Terms

Beyond the financial elements, several non-monetary terms can be negotiated, such as:

  1. Confidentiality Clauses: These restrict the disclosure of certain information about your employment or the agreement itself.
  2. Non-Disparagement Clauses: Each party promises not to say anything negative about the other.
  3. Agreed Reference: A crucial element, ensuring you receive a favourable and agreed-upon reference from your employer.
  4. Garden Leave: You may agree to a period where you are not required to work but are still employed and receiving pay.
  5. Retention of Company Property: Negotiations over retaining items like a company car or phone.
  6. Company-Funded Benefits: Agreements might include continuing benefits like private health insurance for a certain period.

Requesting a Settlement Agreement from Your Employer

If you have not received a settlement agreement offer from your employer, you might consider requesting it. Initiating a request for a Settlement Agreement with your employer requires a strategic approach to ensure the conversation remains confidential and does not adversely impact any potential future legal proceedings. 

It’s important to understand that direct discussions or correspondence about leaving your job or requesting a Settlement Agreement can be used in the Employment Tribunal or Court proceedings. These are considered “on the record” and could negatively affect your claim or the compensation you might receive.

The goal of requesting a Settlement Agreement is to negotiate openly with your employer, where you and your employer can communicate openly without the concern that any concessions made could later affect you if no agreement is reached and litigation ensues.

There are two key ways to conduct these negotiations:

Without Prejudice, Discussion or Correspondence

This involves meetings, discussions, or exchanging letters where you and your employer negotiate the terms for ending your employment. These are “off the record” and cannot be mentioned in any subsequent Employment Tribunal or Court proceeding.

To initiate this, you should clearly state that your communication or meeting request is “Without Prejudice” – for instance, by using this term as a header in your correspondence or explicitly stating it at the beginning of a discussion or meeting.

Protected Conversation (Employment Rights Act 1996, Sec 111A)

Similar to the above, this method also involves discussions to negotiate the end of your employment, but it pertains explicitly to unfair or constructive dismissal claims in the Employment Tribunal.

It’s vital to note that this protection does not extend to discrimination or other employment law matters. Most Protected Conversations are also remarked as being Without Prejudice for added confidentiality.

In both circumstances, when you approach your employer, it is beneficial to reference the relevant terms – “Without Prejudice” and “Protected Conversation” under Section 111A of the Employment Rights Act 1996. It’s also crucial to enter these discussions with a clear understanding of your potential claims, their estimated value, and your desired outcome, which typically includes the terms you would like in a Settlement Agreement.

Making a Settlement Agreement with Your Employer

Entering into a settlement agreement is a significant endeavour for both employer and employee that involves a series of steps and considerations, ensuring both parties reach a mutually acceptable resolution.  As a settlement agreement is a legal contract between you and your employer, both parties must adhere to its terms, which often include confidentiality clauses.

Before starting the negotiation, it’s essential to seek advice, especially if you are unsure about the value of your claim. Collect all appropriate documents, such as your job contract, particulars of the dispute, and any corresponding communication. Typically, employers cover the cost of independent legal advice for the employee, as signing without such advice still allows room for tribunal claims.

Your employer might initiate discussions about the agreement’s contents in person or in writing. Evaluate your employer’s proposal by considering the strength of your case, the difference between the offer and potential tribunal outcomes, workplace changes, alternative options, and the stress associated with a tribunal claim.

It’s also important to consider how the settlement might affect any benefits like Universal Credit, as the DWP could reclaim tribunal winnings, whereas settlement claims usually aren’t. Unless you agree differently, you should be given at least ten calendar days to evaluate the offer. 

Reaching an Agreement

If you decide to accept the offer, your employer will draft the agreement. Ensure it’s written, covers the specific dispute, is made by an independent lawyer, and complies with settlement agreement regulations. If you’re unsure about the offer’s validity, seek further advice from a solicitor experienced in employment law before signing a settlement agreement.  

In cases where your employer fails to honour the agreement, you can start a litigation process to claim breach of contract in the county court. If the agreement was reached during a tribunal and the claim was put on hold, you can request the tribunal to revive your claim if the employer doesn’t fulfil their obligations within the specified timeframe.

Also read: How to take legal action against a school

Let Gulbenkian Andonian Solicitors Guide You in Your Settlement Agreement

At Gulbenkian Andonian Solicitors, we understand the challenges involved in employment claims and settlement agreements. Our team of expert employment solicitors is here to guide you, whether you want to make a claim or negotiate a settlement agreement offer, ensuring your rights and interests are protected throughout the process.

We can assist you in understanding the detailed terms of the settlement agreement, ensuring they align with your best interests. Our role is to offer clear, independent legal advice, enabling you to navigate the intricacies of employment law. Whether it’s interpreting the code of practice, negotiating the terms of the agreement, or advising on the implications of accepting the settlement, we’re here to provide comprehensive support.

Our commitment is to ensure that you make informed decisions, fully aware of the potential impact on your future employment rights. With our specialist employment claim advice, you can confidently navigate the process of reaching a settlement agreement, knowing that your legal and professional interests are in capable hands.

Contact us today, and let us help you to preserve your interest.


Accepting a settlement agreement can provide a clean break from your employer, financial compensation, and the avoidance of costly and time-consuming legal proceedings.

Indeed, you have the right to negotiate over the conditions of an agreement deal. To make sure the conditions are reasonable and favourable to you, it is important to have legal counsel.

If your employer offers a settlement agreement, the first thing you should do is evaluate the terms of the agreement. You should also seek independent legal advice to understand the implications and ensure that the terms are in your best interest.

Yes, a settlement agreement may be used to prevent an employee from bringing certain claims before an employment tribunal. It is a means by which the parties can come to a mutually beneficial agreement without going to court.

It’s advisable to seek the expertise of a settlement agreement solicitor to review the terms of the agreement and provide legal advice, ensuring that your rights are protected and that the terms are fair and equitable. As an employee, you might not have to pay the legal fees involved. Because if you sign an agreement without legal advice, it leaves room for tribunal claims.

Gulbenkian Andonian Solicitors specialise in a broad range of employment and litigation law areas. Our expertise includes handling complex employment disputes, negotiating settlement agreements, professional negligence matters and providing comprehensive legal advice on employment rights and obligations and more. 

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At Gulbenkian Andonian, we pride ourselves on “Excellence, Experience and Efficiency”. With over 35 years of experience on your side, our team of London based lawyers and solicitors have a wealth of experience advising individuals, families and businesses of all sizes to find clarity on UK law.

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