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Employment

Settlement Agreements

Settlement Agreements

We advise employers on using Settlement Agreements to resolve disputes or end employment relationships on clear, lawful terms. Our goal is to protect your business while ensuring certainty and minimising the risk of tribunal claims.

We advise employers on using Settlement Agreements to resolve disputes or end employment relationships on clear, lawful terms. Our goal is to protect your business while ensuring certainty and minimising the risk of tribunal claims.

Law for life

What is a Settlement Agreement?

A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding contract between employer and employee. Under the agreement, the employee usually receives a financial payment in return for waiving their right to bring claims against the employer in an employment tribunal or court.

Settlement Agreements are commonly used where employment is ending, such as in cases of redundancy, disputes, or agreed exits. They provide both parties with a clean break and legal certainty.

Employers often enter into Settlement Agreements to:

  • Avoid the time, cost and risk of defending tribunal claims
  • Ensure confidentiality around a dismissal or redundancy
  • Provide certainty when resolving workplace disputes
  • Offer enhanced redundancy or early retirement packages
  • Agree post-employment restrictions or references
  • Avoid the time, cost and risk of defending tribunal claims
  • Ensure confidentiality around a dismissal or redundancy
  • Provide certainty when resolving workplace disputes
  • Offer enhanced redundancy or early retirement packages
  • Agree post-employment restrictions or references
law for life

How are Settlement Agreements Concluded?

For a Settlement Agreement to be valid:

  • The employee must receive independent legal advice (usually with a contribution to costs paid by the employer)
  • The terms of the agreement must be clearly set out and mutually agreed
  • Compensation offered will depend on the circumstances and strength of any potential claims. The first £30,000 can usually be paid tax-free but contractual payments remain taxable
  • The employee must receive independent legal advice (usually with a contribution to costs paid by the employer)
  • The terms of the agreement must be clearly set out and mutually agreed
  • Compensation offered will depend on the circumstances and strength of any potential claims. The first £30,000 can usually be paid tax-free but contractual payments remain taxable

Speak to our Employment Team

Rebecca Hutson
Trainee Solicitor
Trainee Solicitor
Sara Marshall
Associate Partner
Associate Partner
Georgia Harris
Solicitor
Solicitor
Charlotte Dixon
Trainee Solicitor
Trainee Solicitor

If you need advice about your rights at work or support with a dispute, we are ready to help.

Contact
Rebecca Hutson
Trainee Solicitor
Trainee Solicitor
Sara Marshall
Associate Partner
Associate Partner
Georgia Harris
Solicitor
Solicitor
Charlotte Dixon
Trainee Solicitor
Trainee Solicitor
Employment

How Franklins Solicitors Can Help

We combine technical expertise with a commercial approach to help employers use Settlement Agreements effectively. Our services include:

Drafting & Negotiation

Preparing legally compliant agreements
tailored to your situation.

Risk Assessment

Advising on the merits of using a Settlement Agreement in specific cases.

Dispute Resolution

Using agreements to resolve conflicts
efficiently and cost-effectively.

Protection Clauses

Including confidentiality, references and restrictive covenants where appropriate.

Where Employers Turn for Employment Law Advice

With a strong reputation across the region, our Employment Law team consistently earns 5-star reviews from clients for delivering clear, reliable guidance on all aspects of employment matters.

Employment

How Franklins Solicitors Can Help

We combine technical expertise with a commercial approach to help employers use Settlement Agreements effectively. Our services include:

Drafting & Negotiation

Preparing legally compliant agreements tailored to your situation.

Risk Assessment

Advising on the merits of using a Settlement Agreement in specific cases.

Dispute Resolution

Using agreements to resolve conflicts efficiently and cost-effectively.

Protection Clauses

Including confidentiality, references and restrictive covenants where appropriate.

Where Employers Turn for Employment Law Advice

With a strong reputation across the region, our Employment Law team consistently earns 5-star reviews from clients for delivering clear, reliable guidance on all aspects of employment matters.

eMPLOYMENT

Settlement Agreements FAQs

No — employees can negotiate or reject the agreement but most agreements provide a financial incentive to accept.

The employee must receive independent legal advice and the agreement must meet statutory requirements.

Yes — agreements often include confidentiality, agreed references and restrictions on future competition.

Some home insurance, motor insurance or packaged bank account policies may provide legal expenses insurance. It may therefore be worth checking any existing policies you have to see if they provide legal expenses insurance that cover the type of claim you are seeking advice on.

Alternatively, if you are in the process of negotiating a Settlement Agreement with your employer, whilst it is not a strict legal requirement, many employers will offer a contribution to your legal fees in the region of £500 + VAT – £750 + VAT. It may therefore be worth discussing this with your employer to understand the value, if any, of the contribution your employer may be willing to make to your legal fees. Please do note however, this is intended to be a contribution only in most cases, rather than covering the full legal fees.

No, our fees are charged on a time spent basis, at the relevant team member’s hourly rate. You shall be provided with a fee estimate at the point of instruction, and at various points subsequently throughout your matter, as required.

Experienced Solicitors Providing Expert Legal Advice

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Please read our Privacy Policy. Franklins Solicitors LLP is a Limited Liability Partnership and is authorised and regulated by the Solicitors Regulation Authority, SRA No: 570602. Registered in England under Company No: OC303900, VAT No: 365 919316. A list of members is available for inspection at the Registered Office at our Northampton Branch.

Please read our Privacy Policy. Franklins Solicitors LLP is a Limited Liability Partnership and is authorised and regulated by the Solicitors Regulation Authority, SRA No: 570602. Registered in England under Company No: OC303900, VAT No: 365 919316. A list of members is available for inspection at the Registered Office at our Northampton Branch.

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