Settlement Agreements

Our Employment Law team has many specialist lawyers who bring employment based solutions to both employers and individuals.

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We have a number of specialist Employment Lawyers within our Employment Law Team available to provide comprehensive guidance in relation to the legal requirements and commercial considerations where an employer wishes to make a settlement offer to an employee.

A settlement agreement is a document provided to an employee by their employer with the intention of terminating employment and to settle potential claims the employee has against their employer.

Settlement Agreements for Employer 
Settlement Agreements for Employees
Settlement Agreements for Groups

Our lawyers within in the employment lawyers have extensive expertise and experience which allows us to provide our clients with the most up to date advice and practical solutions whilst negotiating commercially considered and pragmatic settlements. 

 Our range of services includes:

  • Drafting and advising on the terms of settlement agreements
  • Advising on tailored commercial settlement terms and figures
  • Drafting and negotiating bespoke amendments tailored to specific client needs and requests
  • Identifying and valuing potential claims arising out of the circumstances leading up to the termination of employment and assisting to reduce exposure


FAQs

What is a settlement agreement? 

A settlement agreement, previously known as a compromise agreement, is a legally binding contract between an employer and an employee that typically brings the employment relationship to an end or resolves a dispute. It outlines the terms and conditions agreed upon by both parties, often including financial compensation and other provisions.

When should an employer consider offering a settlement agreement?

Whilst there is no obligation to give a formal contract of employment, all employees or workers are entitled to be provided with a written statement of employment particulars. This document should set out the core terms governing the relationship including but not limited to hours of work, rate of pay, holiday entitlement, place of work and length of the job if fixed term. This should be provided to you on day one of your employment/contractual arrangement. 

What should be included in a settlement agreement? 

A settlement agreement should include details such as the termination date, the amount of any financial compensation being offered, any post-employment restrictions or obligations, confidentiality clauses, and a clear statement of the claims being settled.

Is it necessary for the employee to receive independent legal advice? 

Yes, it is a legal requirement for the employee to receive independent legal advice from a qualified solicitor before signing the settlement agreement. This ensures that the employee fully understands the terms and consequences of the agreement. As such it is usual practice for an employer to make a contribution towards the employee’s legal costs. 

What are the potential risks if a settlement agreement is not handled correctly? 

If a settlement agreement is not drafted properly or the employee’s rights are not protected, there is a risk that the agreement may not be legally binding. This could lead to potential claims or disputes resurfacing, resulting in additional costs and legal complications.

Legal Insight

A settlement agreement is a document provided to an employee by their employer with the intention of terminating employment and to settle potential claims the employee has against their employer. 

The agreement generally includes a Termination Payment to the employee as compensation for the employee’s agreement not to pursue any employment claims against the employer. Our team of specialised employment solicitors are able to provide you with advice on the terms and effect of the settlement agreement as well as the offer which has been made to you.

We can also look to assist you with requesting a settlement agreement with your employer if you have a dispute with your lawyers and your employer has not already offered you one.

FAQs

What is a settlement agreement? 

A settlement agreement, previously known as a compromise agreement, is a legally binding contract between an employer and an employee that typically brings the employment relationship to an end or resolves a dispute. It outlines the terms and conditions agreed upon by both parties, often including financial compensation and other provisions.

Do I have to take legal advice on the terms of the settlement agreement? 

Yes. In order for the settlement agreement to be binding there are certain legal formalities to comply with. One of these is that you need to take independent legal advice on the terms and effect of the settlement agreement. 

Who pays for the independent legal advice?

Your employer should pay a contribution towards your legal fees, which will be stipulated in your settlement agreement. The contribution should be at a level where it covers all or most of your legal fees, but this will depend on each particular case, and it is important to note that this is only a contribution. Ultimately, you will be responsible for any shortfall, however, as part of any negotiations you can ask for the contribution to be increased. 

Can I discuss the settlement agreement with anyone?

There will be a clause in your settlement agreement stating that you must keep the terms and circumstances surrounding your departure and the settlement agreement confidential. This means you cannot disclose this information to anyone, save for disclosure to HMRC as required by law, your professional legal advisers and usually your spouse or civil partner.

Can I negotiate on a settlement agreement?

Generally speaking yes, however the grounds for doing so will generally be dependant on each individual situation and our specialised lawyers will be able to advise you on this. 

Reorganisations and changes in economic circumstances can lead to large scale redundancies. In such cases employers may want to offer enhanced redundancy terms in exchange for the redundant employees entering into settlement agreements. In order to sign off a settlement agreement, employees must take independent advice, typically from a solicitor for those agreements to be legally binding which employers usually offer a contribution towards the advice. Our dedicated mass settlement agreement service in designed to ensure that employees receive the required advice in a cost-effective way. This is often referred to a mass settlement agreement project.

At Herrington Carmichael we have the expertise and experience in assisting in mass settlement agreement projects working with the company to allow it to quickly and efficiently move through the project whilst always providing outstanding independent advice to the individual employees.

How can we help with group settlement agreements efficiency?

There are a number of ways we make this process hassle free for the company and the employees, these include:

  • Smooth onboarding of the employees as clients.
  • Experience in holding group meetings with employees and conducting mass settlement agreement projects.
  • Providing information sheets to employees at the outset of each project in order to deal with any specific questions that may arise.
  • Reviewing and agreeing the terms of the template settlement agreement, insofar as is possible, prior to it being given the employees.
  • Agreeing a transparent fee agreement.
  • Providing a single point of contact for quick and easy booking of appointments.
  • The ability to hold remote meetings via phone or Teams.
  • Providing regular updates to the company about the volume of agreements that have been signed off.
  • Single point of invoicing.

Are we hindered by tight timescales and geographical issues?

Not at all. We have experience in completing a high volume of agreements by working remotely (or on-site if required). We are also able to carry out group advice sessions covering the general aspects of the settlement agreement followed by individual advice sessions which cover any specific questions the individual employee may have. At all times we act independently and in accordance with the legal requirements for a valid settlement agreement.

How does the pricing structure work?

With a group settlement a lot will depend on the size of the group. If you contact us, we will be able to provide competitive fixed rates which are agreed at the start.

FAQs

What is a settlement agreement? 

A settlement agreement, previously known as a compromise agreement, is a legally binding contract between an employer and an employee that typically brings the employment relationship to an end or resolves a dispute. It outlines the terms and conditions agreed upon by both parties, often including financial compensation and other provisions.

Do I have to take legal advice on the terms of the settlement agreement? 

Yes. In order for the settlement agreement to be binding there are certain legal formalities to comply with. One of these is that you need to take independent legal advice on the terms and effect of the settlement agreement. 

Who pays for the independent legal advice?

Your employer should pay a contribution towards your legal fees, which will be stipulated in your settlement agreement. The contribution should be at a level where it covers all or most of your legal fees, but this will depend on each particular case, and it is important to note that this is only a contribution. Ultimately, you will be responsible for any shortfall, however, as part of any negotiations you can ask for the contribution to be increased. 

Can I discuss the settlement agreement with anyone?

There will be a clause in your settlement agreement stating that you must keep the terms and circumstances surrounding your departure and the settlement agreement confidential. This means you cannot disclose this information to anyone, save for disclosure to HMRC as required by law, your professional legal advisers and usually your spouse or civil partner.

Can I negotiate on a settlement agreement?

Generally speaking yes, however the grounds for doing so will generally be dependant on each individual situation and our specialised lawyers will be able to advise you on this. 

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