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24 Jul 20
Guide to Settlement Agreements

• What is a Settlement Agreement?

Settlement Agreements (formerly known as Compromise Agreements) are settlements which are legally binding contracts made between an employer and employee. They are usually used in connection with the ending of employment and/or when both parties want to settle a dispute that has arisen between them. A Settlement Agreement generally results in the employee waiving their right to bring any claims against the employer.

• Do I have to accept a Settlement Agreement?

No, but your Solicitor will explain the pro’s and con’s, depending on your circumstances. It should be noted however that if you take advice from a Solicitor about a Settlement Agreement but then decide to not accept the terms offered you may be liable for your Solicitors fees on the basis that your employers contribution towards your legal fees is only valid if the Agreement is signed.

• Can I request a Settlement Agreement from my employer?

Settlement Agreements can be requested by either employee or employer as a way to part company on agreed terms.

• How long do I have to decide I want to accept the Settlement Agreement?

According to ACAS Guidelines, Employees should be given a minimum of 10 days to decide whether they want to accept a Settlement Agreement, however in our experience this is not always the case and employers require a very quick turnaround time. At Watkins and Gunn we are able to provide urgent appointments to ensure that deadlines are met whilst still giving expert legal advice.

• Why do I need a Solicitor?

Settlement Agreements are not legally effective unless the employee has received independent legal advice in relation to the Agreement.

• How much will it cost?

In most cases your employer will contribute to your legal costs of receiving the relevant advice. We will discuss this with you before we begin any work and try to avoid situations where we need to charge you directly for any work carried out.

• Will my termination payment be tax free?

Most ‘termination payments’ under £30,000 can be made tax free. However, the treatment notice pay and holiday pay are usually subject to the deductions in the usual way.

• What about a reference?

Whilst there is no legal obligation on your employer to provide you with a reference it is common practice for these to be included as part of the Settlement Agreement. The reference is usually attached to the Agreement and will often be a basic factual reference providing minimal information such as dates of employment and job title, although this is not always the case.

Contact us today if you need advice or help with a Settlement Agreement –

This article is for general information purposes only and does not constitute legal or professional advice.

Contact us today 0300 1240 400