A settlement agreement, previously known as a ‘compromise agreement’, is a legally binding contract between you and an employee. It typically involves a severance payment in return for the employee not pursuing a claim at the employment tribunal.
Our employment law solicitors are experts in settling disputes, providing unparalleled settlement agreement advice tailored to your business.
We understand that every case is unique and may require a different approach to negotiate a reasonable resolution.
We get to know you, your business, and your objectives to ensure that your interests are properly represented and that we obtain the best outcome to protect the future of the business.
We regularly act for directors, shareholders, and both private and public sector organisations. The team can advise on settlement agreement negotiations and will act on your behalf as the employer.
We offer a range of services related to employment settlement agreements, including:
Advising on the terms of the agreement and alternative outcomes
Providing negotiation support for employer’s entering into an agreement
Delivering legal representation during settlement negotiations
Managing the impact of the agreement on existing and future claims
We help clients nip problems in the bud and resolve their employment issues every day.
Here are the most common questions we receive in regard to settlement agreements for employers.
Our fees are typically calculated on an hourly basis, ranging from £180 to £295 plus VAT.
Fees may also vary depending on the complexity of the case. We will be happy to provide you with a full case-specific estimate when we meet with you.
It is important to also bear in mind that employers typically cover or contribute towards the costs of independent legal advice for their employees.
A settlement agreement can be used to save the business time and money, as well as its reputation. Settlement agreements can be used in a variety of situations, particularly where an employer anticipates an employee may bring a claim and wants to avoid a long, drawn-out process.
Signing a settlement agreement ultimately provides security for both you and the employee. Our settlement agreement experts work hard to find the most reasonable and mutually beneficial solution.
Settlement agreements typically centre around a severance payment in exchange for not bringing a claim. The settlement agreement should therefore include the termination payment and the balance of any outstanding salary, bonuses, or holiday pay to the employee.
Confidentiality clauses can also be included to the benefit of both parties, as well as non-derogatory clauses that can prevent parties from saying unpleasant things about each other.
The employee will usually waive rights they may have against the employer, whilst the employer often agrees to provide a good reference.
The agreement must also legally identify the adviser who consulted with the employee and must state that its terms comply with the relevant statutory provisions.
To make a settlement agreement valid, the employee must receive independent legal advice. There is a cost in receiving such advice and therefore employers typically offer to fully cover or pay a contribution towards these costs.
The independent adviser must have a current contract of insurance or professional indemnity insurance covering the risk of a claim by the employee. The adviser must also be independent, meaning they cannot be employed by, acting for, or connected with the employer.
There are no legal minimum pay-outs and you are not bound to compensation limits set for employment tribunals.
We’ve found that a reasonable payment can range anywhere from three to six month’s salary, plus notice pay. It is important to note, however, that the amount payable is entirely dependent on the case and what you want to reasonably pay as the employer depending on the strength of any defence.
The timescale for a settlement agreement depends entirely on the complexity of the negotiations at hand. Typical periods can be anything up to 28 days.
According to Acas settlement agreement guidance, employees should be given a minimum of 10 calendar days to decide whether to accept the settlement offer presented.
Compensatory payments of up to £30,000 can be paid without deducting tax.
Whereas certain payments such as pay in lieu of notice and holiday pay are subject to normal deductions for tax and National Insurance.
Failing to deduct tax from payments can leave the employer liable to the HMRC, so it is always important to seek advice.
You can withdraw a settlement offer at any stage before a binding settlement agreement is signed by the parties.
It is important to seek legal advice about the implications of withdrawing your offer before doing so. If you have made a settlement offer and you are concerned about current negotiations, please do get in touch to see how our settlement solicitors can help.
A settlement agreement is legally binding and, if there is a breach of settlement agreement by the employer, the employee may bring a breach of contract claim against the employer. The employee could be owed compensation as a result.
If you think that you may have breached a settlement agreement, get in touch as soon as possible. Early intervention from a settlement agreement adviser is essential to minimise the damage.