If you have been offered a Settlement Agreement, perhaps as part of an employment exit, redundancy, or workplace dispute, you may be wondering what the negotiation process is and why you are being told to seek legal advice.
In this article employment solicitor, Laura Colebook, explains the process of negotiating a Settlement Agreement, the key role a legal adviser such as a employment solicitor plays, how they can help review it and ensure the terms are fair and enforceable.
Need help with a settlement agreement? Contact us now.
What is a Settlement Agreement?
A Settlement Agreement is a legally binding contract between you and your employer (or former employer).
It typically sets out the terms under which you will leave your employment and confirms that you will not pursue any legal claims against your employer, in exchange for agreed financial and non-financial terms.
You may be offered a Settlement Agreement if:
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- You have been selected for redundancy
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- You have raised a grievance
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- There’s been a breakdown in working relationships
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- Or your employer wants to minimise risk
Once signed, a Settlement Agreement usually prevents you from bringing claims in the Employment Tribunal or Court, even if you later discover new facts.
In light of this, understanding what you are agreeing to is vital.
Why do I need an Employment Solicitor?
Legal advice is not optional when signing a Settlement Agreement. It is a legal requirement under the Employment Rights Act 1996. This safeguard exists to ensure employees do not unknowingly waive important statutory rights.
Your legal adviser must be:
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Properly qualified, such as a solicitor
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Professionally insured
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Acting independently and solely in your best interests
An employment solicitor will explain what rights you are giving up, assess whether the terms are lawful, and help you understand whether the agreement is reasonable in light of your circumstances.
Who will pay for the legal costs relating to my Settlement Agreement?
In most cases, your employer will offer to pay a fixed contribution toward your legal fees, typically ranging from £500 to £750 + VAT.
If you are a senior employee or the matters around your employment exit are particularly complicated, then employers sometimes provide larger sums in for legal fees to reflect the amount of additional time your legal advisor may need.
If additional negotiation or advice is required beyond the employer’s contribution, your solicitor will explain any further costs before work is carried out.
How long does it take to negotiate a Settlement Agreement?
Timescales vary depending on the issues involved and how quickly both parties engage. Straightforward cases may be resolved within a few days, while more complex matters can take a couple of weeks.
Settlement Agreement negotiations are often quicker where the key terms are broadly agreed at the outset.
What issues should be discussed in Settlement Agreement negotiations?
Unless the initial offer is particularly generous, there is often scope to negotiate aspects of a Settlement Agreement. An experienced solicitor will be able to advise on which areas may realistically be open to discussion.
Common negotiation points include:
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The level of compensation
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Payment of notice and bonuses
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Confidentiality and non-disparagement clauses
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Post-termination restrictions
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References and announcements
Your solicitor will make representations on your behalf where appropriate.
What will an Employment Solicitor do during process?
These are some of the ways a legal adviser will support you if you have been offered a Settlement Agreement.
1. Check that the Settlement Agreement is legally compliant
Your solicitor will confirm that the Settlement Agreement meets all statutory requirements. Without this, the agreement may not be enforceable.
2. Explain what you are signing in plain English
Settlement agreements can be full of legal jargon. A legal adviser will go through the Settlement Agreement in plain English, explaining:
- Which claims you are waiving (e.g., unfair dismissal, discrimination),
- What the financial offer covers (e.g., redundancy pay, notice pay, bonuses),
- What post-employment restrictions or confidentiality terms apply,
- That you know exactly what you are agreeing to and what, if anything, will continue to apply after you leave the business.
3. Assess what legal rights you could be waiving
Your adviser will ask about what’s happened at your employment to identify any potential legal claims, and will explain:
- The strength of any claim you may have.
- Whether the compensation you’re being offered is fair in comparison.
An experienced employment solicitor can also advise you on the nature of your dispute with your employer, if you have any employment law claims, the potential value of those claims, and what action you might be able to take against your employer. This will assist you make an informed and strategic decision rather than signing under pressure or uncertainty.
4. Try to negotiate better terms
Depending on your circumstances, an adviser may try and achieve the following when negotiating a Settlement Agreement:
- A higher settlement sum,
- A more favourable job reference,
- The removal or softening of restrictive covenants,
- A mutual confidentiality or non-disparagement clause,
- Full coverage from the employer to seek legal advice so there would not be a shortfall on you.
Even if you choose not to negotiate, an adviser can flag any risks or clauses that should be clarified or narrowed before you sign
5. Advise on other benefits outlined in the Settlement Agreement
Some parts of the financial payment you receive may be tax-free (e.g., compensation for loss of employment up to £30,000), while others (like notice pay) may be taxable. An adviser will explain how these are typically handled.
They can also review how the agreement affects:
- Company property
- Shares or options
- Company benefits (e.g., medical insurance or car schemes)
- Bonus payments
If anything is unclear or missing, an adviser will help raise the right queries to the employer and ensure that that these are rectified before the Settlement Agreement becomes final.
6. Protect and support you so you have time to fully consider of your options
Settlement Agreements often come at stressful moments. In most cases, the review and advice on the terms of a Settlement Agreement by a legal adviser can be completed within a few days.
However, you will be fully supported throughout the process to ensure matters are carried out as smoothly as possible for you.
Employers can sometimes place undue pressure on employees to sign a Settlement Agreement immediately. The Advisory, Conciliation and Arbitration Service (ACAS) guidance states that employers should give employees a minimum of 10 calendar days to decide whether they want to accept a Settlement Agreement.
If an employer demands to go against this, your legal adviser can explain to your employer that they must give you space and support to make a calm, informed decision. If they refuse to accept the position, this conduct could be used in any Employment Tribunal to show that the employer has acted improperly.
What happens after you receive legal advice on a Settlement Agreement?
Once you have completed negotiating a Settlement Agreement that you are happy with, your legal adviser will sign a certificate confirming that you have been advised independently and that all legal requirements have been met. This certificate is part of the final agreement. Once all parties sign, the Settlement Agreement becomes legally binding, and your rights to bring most claims relating to your employment will be waived.
Do I have to accept the Settlement Agreement?
Absolutely not. You are free to reject it, request changes, or pursue a claim if you believe it is in your best interests.
How long do I have to decide if I want to accept the terms in a Settlement Agreement?
Some employers may offer a deadline, but best practice in line with ACAS guidance is to give you at least 10 calendar days to consider the terms and take legal advice. You are entitled to a reasonable period to reflect.
What if I do not obtain legal advice about a Settlement Agreement?
If you do not receive independent legal advice, the Settlement Agreement will not be legally valid for waiving your statutory rights. This means your employer would remain at risk of you bringing a claim even after signing.
Can I change my mind after signing a Settlement Agreement?
No. Once a Settlement Agreement is signed by both parties and meets legal requirements, it becomes binding.
What happens if I breach a Settlement Agreement?
If you break an agreement, for example through a confidentiality clause, your former employer may take legal action to enforce the terms, which could include recovering any payments made to you or seeking damages. You could also be required to cover their legal costs, which may be significant.
This is why you must seek legal advice before signing a Settlement Agreement, to ensure you fully understand the consequences, including what happens if you breach the terms, as once signed, the agreement is legally binding and enforceable.
How we can help
Legal advice is essential for a Settlement Agreement to be considered valid and gives you clarity, protection, and peace of mind.
Your legal adviser works for you, not your employer. Their job is to make sure the terms are fair and that you understand what you are signing.
You can negotiate, often with your adviser’s assistance to try and improve the offer or secure better post-employment protections. Once signed, the agreement is final. Your employer usually contributions towards your legal costs.
Ultimately employees do have a choice to refuse to sign a Settlement Agreement but they ought to seek legal advice to understanding their options and the associated risks, so that they can make an informed decision.
We Help You To Get a Fair Agreement
If you would like learn more or have a settlement agreement reviewed contact:
l.colebrook@thpsolicitors.co.uk
You can also listen to Laura’s podcast about Settlement Agreements.