Leaving your job under difficult circumstances is never easy. If you’ve been offered a settlement by your employer, talking to experienced settlement agreement solicitors can help you make sense of what it all means and whether it’s the right move for you.
In this blog post, we will explore what settlement agreements are, when they’re used, what your rights are, and how to make sure you leave on the best possible terms.
What Is a Settlement Agreement?
A settlement agreement is a legally binding document between you and your employer. In simple terms, it’s a contract that usually offers you money in exchange for agreeing not to pursue any legal claims against the company.
This kind of agreement is often used when:
– You’re being made redundant
– There’s a workplace dispute or grievance
– Both sides agree it’s time to part ways
The agreement typically includes a financial offer, confidentiality clauses, and confirmation that the working relationship will end.
Why Employers Offer Them
Employers don’t hand out settlement agreements for no reason. These agreements help them avoid drawn-out disputes or potential tribunal claims.
Instead of going through months of back-and-forth, they offer a clean break. You get compensation, and they get peace of mind that there won’t be legal action later on. That said, what’s offered might not always be fair or reflect what you’re legally entitled to.
That’s why it’s so important to get advice from a solicitor before signing anything.
What Should a Fair Agreement Include?
Not all settlement agreements are created equal. A fair one should include:
– A financial package that compensates you adequately
– Payment for notice, outstanding wages and holiday pay
– An agreed reference (optional but helpful)
– A tax breakdown
Some may also include clauses that restrict what you can say publicly about the company, or where you can work next. These should be reviewed carefully.
You also have the right to take the agreement to a legal adviser before signing. In fact, for it to be valid, this is a legal requirement.
Are You Being Pressured to Sign?
If you’ve been handed a settlement agreement out of the blue, it can feel like a shock. Some employers use them after internal disputes or poor performance reviews. Others might present them during redundancies.
Regardless of the situation, you should never be forced into signing quickly. You’re entitled to a reasonable period to consider the terms and to seek legal advice.
In some cases, there could be a risk of unfair dismissal. If you’re unsure, sites like Citizens Advice offer guidance on how to spot when things don’t feel right.
What Happens if You Say No?
You might decide the agreement isn’t fair or that you’d rather pursue a tribunal claim instead. That’s your right. Declining the offer doesn’t affect your statutory rights.
If you reject it, your employer might still terminate your employment, but they’ll need to follow the proper legal procedures. In some cases, declining the initial offer opens the door to renegotiation. Legal advice helps you assess whether the original terms are worth taking.
Taxes and Payments Explained
Some parts of your settlement may be tax-free, such as the first £30,000 of a termination payment. However, notice pay, holiday pay, and bonuses are usually taxed.
It’s important to:
– Request a clear breakdown of payments
– Understand what each element represents
– Know what’s taxable and what’s not
Having a solicitor review the financial terms can prevent surprises down the line. You’ll also want to make sure there’s no ambiguity around pensions or share schemes.
Legal Advice Isn’t Optional – It’s Essential
Legally, a settlement agreement is only binding if you receive independent legal advice. Your employer will usually contribute to the cost of this, or pay it outright.
The adviser will:
– Review the document in full
– Flag up any unfair terms
– Explain your rights and options
A lawyer’s role isn’t just to rubber-stamp the deal. It’s to ensure you fully understand what you’re signing and whether it’s in your best interests.
Can You Negotiate?
Absolutely. If the first offer doesn’t sit right, or you believe it’s too low, negotiation is possible. In fact, many employers expect a counter-offer.
You might:
– Ask for more money
Request an agreed reference
– Push back on restrictive clauses
Negotiating doesn’t mean burning bridges. Done respectfully, it can result in a better outcome for everyone involved. Acas has tips on what to look for in a fair settlement.
Image credit: Pexels
How Long Do You Have to Decide?
Typically, you’ll be given 10 calendar days to review a settlement agreement. This isn’t a fixed rule, but it’s considered reasonable by Acas (the Advisory, Conciliation and Arbitration Service).
If you need more time, your solicitor can request it. Especially if you’re negotiating or gathering further information, rushing the process benefits no one.
Turning a Tough Exit Into a Fresh Start
Leaving your job through a settlement agreement can feel like a loss. But handled the right way, it can also be an empowering step forward.
You get closure, financial support, and the chance to move on without long legal battles. Make sure you understand your rights, get proper advice, and think about what’s right for your future.
Legal Disclaimer: This article is for information only and does not constitute legal advice. If you have been offered a settlement agreement or are facing workplace dismissal, you should speak to a qualified employment solicitor for personalised advice.