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Settlement Agreements for Employees

Please click here for more information on settlement agreements for employers.

In employment law, a settlement agreement (formerly known as a compromise agreement) is an agreement whereby an employee or worker agrees not to pursue certain employment claims against their employer, in return for which the employer will pay to the employee a sum of money.

Settlement agreements are still commonly referred to as compromise agreements as ultimately they compromise an employee’s claims. Such agreements are used to record an employee's terms of departure where they are to receive a termination payment in return for the waiver of all actual and potential statutory claims against the employer. For a valid waiver of statutory employment rights, certain statutory conditions must be met:

  • The agreement must be in writing.
  • The agreement must relate to a particular complaint or particular proceedings.
  • The employee must have received independent legal advice on the agreement and in particular on its effect on their ability to pursue the statutory rights in question.
  • The adviser must be identified in the agreement.
  • The adviser must have insurance in relation to the advice.
  • The agreement must state that the conditions regulating settlement agreements in the relevant legislation have been met.

For a settlement agreement to be legally binding, you must obtain independent legal advice. Our specialist employment lawyers, based in Sevenoaks and Tonbridge, regularly advise on settlement agreements (compromise agreements) and act expertly as the adviser referred to in the agreement. Your employer will make a contribution towards your legal fees, the details of which will be set out in the settlement agreement.

One of our employment solicitors will meet with you to ensure they understand the background giving rise to the settlement agreement. They will assess your position and advise you clearly on the effect of signing the agreement. It is common for our lawyers to liaise with your employer to ensure your interests are protected. Occasionally amendments to the settlement agreement will need to be made, or an improved package can be negotiated. As always, our employment solicitors will tailor the advice to your specific case, using the benefit of their years of experience.

Thank you for your help re the settlement agreement between my former employer and I. Your advice was appropriate and helpful – and you were a pleasure to deal with.

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