What is a Settlement Agreement and why have I been asked to sign one?


A Settlement Agreement (also referred to as a Compromise Agreement) is a legally binding contract entered into by an employer and an employee.  There are used in connection with ending the employment of the employee on agreed terms, quite typically used when settling a claim or dispute.

However, in these unprecedented and turbulent times they are also being considered by employers when they are in the unfortunate position of having to make employees redundant.

In signing the agreement, you as the employee, will be waiving your right to bring any claims against your employer and, as such, you are required to take independent legal advice on the terms and effects of the agreement before you sign it.

A Settlement Agreement therefore provides an employer with the comfort and certainty that they are protected against you bringing a successful claim against them, in respect of your employment and/or the termination of your employment.

Since, the employee is obliged to take legal advice on the agreement and that the agreement is principally for the benefit of the employer, it is acknowledged that your employer will contribute toward the cost of you taking that advice.

These types of agreements will usually provide the employee with a lump sum in effect for signing the agreement, in addition to the other payments they are due, and also an agreed reference as part of the settlement.

In advising you on a Settlement Agreement we will assess your particular case and provide easy to understand advice on what your options are and, whether the terms and conditions of the agreement should be improved upon.  Given the agreement will be in ‘full and final settlement’ and as such any payments or benefits not covered will be lost, it is essential you obtain the right advice. 

The decision as to whether to accept and sign a settlement agreement is with you, however with our expert advice you will know exactly where you stand and be in the best possible position to make that decision. 

If your employer has asked you to sign a settlement agreement and you wish to speak with one of our experienced employment solicitors, please call us on 01282 695400.