Our employment law solicitors provide settlement agreement advice for employers and employees in York, Malton, Pickering, Selby and the surrounding areas.
Whether you need help drafting, reviewing or negotiating an employment settlement agreement, our team can provide clear, practical legal advice.
A settlement agreement (previously known as a compromise agreement) is a legally binding agreement between an employer and employee to either terminate the employee’s contract or provide a resolution to a disagreement between the two parties.
The terms of the agreement are usually decided by the employer, but they can be negotiated by the employee. The terms often include some sort of payment to the employee in return for an agreement that they will not bring certain claims against the employer.
Sometimes the settlement agreement will include other things of benefit to the employee, such as an agreed reference letter. For a settlement agreement to be legally binding, the employee must receive independent legal advice on the terms and effect of the agreement before signing.
Settlement agreements are commonly used to:
An employee can make a claim against a business under their contract of employment or employment law. These claims may arise during
In many cases, a business may want to make a payment to an employee in return for an effective waiver of their potential claims. This can help both parties reach a clear and agreed outcome.
For employers, a settlement agreement can help bring an employment relationship or dispute to a clear and managed conclusion. However, the agreement must be drafted carefully to reduce the risk of future claims.
At Crombie Wilkinson Solicitors, we can help employers draft a clear and legally binding settlement agreement that reflects the agreed terms and helps protect the business.
When considering a settlement agreement, there are a number of specific legal issues that employers may need to address, such as:
For employees, a settlement agreement can have a significant impact on your legal rights, future employment and financial position. Before signing, you should understand what the agreement means and whether the terms are fair.
When considering a settlement agreement, there are a number of specific issues employees may need advice on, such as:
At Crombie Wilkinson Solicitors, we can review your settlement agreement, explain the legal effect of the terms and advise whether any points may need to be negotiated before you sign.
Many statutory claims can be settled by a settlement agreement. For example, claims for:
However, some claims cannot usually be settled by entering into a settlement agreement, including some types of:
Other than the legal requirements listed above, the contents of a settlement agreement are largely at the discretion of the business and the employee involved.
Common clauses include:
In a settlement agreement, an indemnity is a promise by one party to cover certain losses, costs or liabilities suffered by the other party.
Businesses must be particularly careful when drafting terms under which they provide indemnification for costs incurred in relation to future legal proceedings.
Businesses should also consider capping their financial exposure and carefully wording the clause to only cover specific types of fees and costs and only those that have been "reasonably and necessarily incurred."
Whether a settlement agreement is confidential will usually depend on the terms proposed by the employer and agreed by the employee.
Confidentiality clauses may cover the terms of the agreement, the existence of the agreement, the reasons for the agreement and, where employment is ending, why the employee is leaving.
Protecting confidential information is often important to a business. However, this does not impact whistleblowing laws. A settlement agreement does not prevent someone from speaking up under the Public Interest Disclosure Act 1998.
ACAS has provided a Code of Practice for settlement agreements, focusing on the confidentiality of pre-agreement discussions.
For a settlement agreement to be valid:
It’s worth reading through the ACAS guidelines before you begin any settlement agreement process.
Termination payments made by an employer can include any agreed payout amount, holiday pay and any wages owed.
Under current tax laws, the first £30,000 of any termination payment is tax-free. Any payment which is, or may be considered to be, in lieu of notice – sometimes referred to as PILON – is subject to the usual tax and national insurance deductions.
Post-employment notice pay, or PENP, should also be considered when assessing the tax position of a settlement agreement.
The amount paid in a settlement agreement depends on several factors, including the employee’s salary, notice period, contract length, the seriousness of the claim, the terms of the agreement and potential loss of earnings.
A reasonable settlement agreement is often counted as two to three months’ worth of salary, but this can be negotiated up or down.
Settlement agreements are used for two main reasons:
An employee can make a claim against a business under both their contract of employment and under statute. These claims may arise:
In many cases, a business may want to make a payment to an employee in return for an effective waiver of their potential settlement claims. Businesses can enter into an agreement with an employee to settle potential claims when they are still working for the business, but in most situations, their employment will have ended (or be about to end).
When considering a settlement agreement, there are a number of specific legal issues and agreements that must be addressed:
We are well known for our expertise in assisting with the creation and enforcement of settlement agreements and providing advice during the discussion period.
Our settlement agreement solicitors charge on the basis of hourly rates ranging from £225-£325 per hour, plus VAT at 20% (£45-£65)
Crombie Wilkinson Solicitors provides settlement agreement advice for employers and employees across York, Malton, Pickering, Selby and the surrounding areas.
Contact our employment law solicitors today for advice on drafting, reviewing or negotiating a settlement agreement.
Settlement agreements won’t affect your Universal Credit, Income Support or Jobseeker’s Allowance. You won’t have to pay these back.
Yes. For a settlement agreement to be legally binding, the employee must receive independent legal advice on the terms and effect of the agreement.
In many cases, the employer contributes towards the employee’s legal fees for taking settlement agreement advice. The amount offered can vary, so it is important to check what the agreement says.
Yes. A redundancy settlement agreement can be used where an employer and employee agree the terms on which employment will end.
A settlement agreement may include confidentiality clauses covering the terms, existence or circumstances of the agreement. This will usually depend on the terms agreed by the employer and employee.
Settlement agreement legal fees may be higher if the matter involves complex claims, discrimination allegations, automatic unfair dismissal, a large number of documents or witnesses, or applications to amend or defend claims.
Fees may also increase if there are preliminary issues to resolve, such as whether the claimant is disabled, or if a costs application needs to be made or defended.
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