Settlement Agreement Solicitor - Employment Lawyers

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Settlement Agreements formerly known as compromise agreements are legally binding documents that set out all of the terms on which an employee/employer relationship will end. Upon termination of employment this type of arrangement can be used by an employer to ensure that the employee will not bring any legal claims against them in the future. In return for giving up their right to bring a claim to the Employment Tribunal, the employee receives an agreed amount of compensation over and above the amount required by law. These are important issues for most businesses and in the relevant circumstances employers are well advised to obtain qualified legal advice from a specialist compromise agreement solicitor at the first opportunity.

What is a Settlement Agreement?

The precise content of the settlement agreement will depend on the circumstances surrounding the employment and the termination. Each arrangement is tailored to particular circumstances and it is essential from an employers perspective to obtain qualified legal advice on settlement agreements from a compromise agreement solicitor. For the most part these arrangements cover the same key matters including:

  • details about the amount of compensation the employee is to receive and related issues of taxation
  • full and final settlement of any claims which the employee has against the employer
  • any matters which are to remain confidential
  • any restrictions being placed on the employee’s future employment
  • the reference that will be provided to future prospective employers
  • assurances provided by the employee and employer

What Affects Validity?

Validity from the perspective of an employer is paramount. Once the money has been paid, the employer needs to know that they are safe from potential action in the Employment Tribunal. Qualified legal advice from a settlement agreement solicitor is essential for both the employer and the empoyee. A settlement agreement is valid and enforceable only if it:

  • is in writing
  • relates to a particular complaint held by the employee
  • is entered into only after the employee has received legal advice from an independent, qualified adviser who is covered by indemnity insurance
  • identifies the adviser
  • states that all of the requirements for a valid compromise agreement have been met

What are the Advantages?

Entering into a settlement agreement means that neither party will have to wait months for a costly and stressful Employment Tribunal claim to resolve the issues. With this type of arrangement both parties know with certainty the specific amount of compensation to be paid and received at an early stage.

Must the Employee Sign?

An employee is never required to sign a settlement agreement. If an employee chooses not to sign it, then no agreement exists with regard to the termination of employment. Without signature the employee remains free to pursue a legal claim against the employer in an Employment Tribunal.

How Soon Before Payment?

Normally the payment is made within one to two weeks after all of the parties have signed the agreement. The exact date of payment will be noted within the agreement.

Is it Taxed?

There is no charge to income tax for payments up to £30,000. However, any amount of compensation in excess of £30,000 will be taxed in the hands of the employee in the normal way, as though it was earned income.

Must a Solicitor be Involved?

The law requires an employee to obtain legal advice before signing a settlement agreement. This is because the employee will be giving up certain legal rights in exchange for money and the deal must be seen to be fair to all parties.

How Much Does it Cost?

In most cases the employer covers not only their own legal charges but also the expenses that the employee incurs while obtaining legal advice.


SOLICITORS HELPLINE: ☎ 0330 660 7004