Settlement Agreement Guide for UK Workers

Gone are the days when a job was for life.

Many of us will occupy multiple jobs over our lifetime. Some studies suggest UK workers move on from a role, on average, every five years.

For most, it’s a conscious and positive decision driven by a desire to move up the career ladder, earn a bit more, or try something new.

Unfortunately, that’s not always the case. Economic changes may demand unforeseen company restructures that prompt redundancies, or a workplace dispute may arise that makes continuing in your post untenable.

In these situations, your employer may offer you a settlement agreement.

This brief guide explains what a settlement agreement is and how it works…

What is a settlement agreement?

Formerly known as ‘compromise agreements’, a settlement agreement is a legal contract that outlines the terms under which your employment will terminate, or a workplace dispute will be settled. It may include the promise of a payment, which will often be more than statutory redundancy pay.

Why am I being asked to sign one?

Your workplace may suggest you sign a settlement agreement to stop you taking legal action against the company. They may consider it quicker and less costly than a HR or tribunal process.

What rights am I giving up if I sign it?

The terms of the settlement agreement are legally binding, for both you and your employer. If you sign it, you waive your right to make a later claim against them for the potential claim(s) outlined in the agreement. Some exceptions do apply though, including any personal injury you were unaware of at the time, or accrued pension rights you may have.

Is legal advice recommended before I sign it?


This is because the agreement is only legally binding if it’s reviewed and signed by an insured, qualified lawyer or authorised trade union representative.

But these agreements are often large, intricate legal documents. A specialist settlement solicitor will make sure you are not unnecessarily signing away rights and can offer guidance on how much your case is worth.

Is this legal advice going to cost me a lot of money?

No. Your employer will usually pay for your independent legal advice, and a specialist settlement agreement solicitor can ensure that is written into the agreement.

Am I obliged to sign the settlement agreement?

No. You should only sign it if you are comfortable with its terms. Just remember to save or record any communication you have on the issue if you plan on taking your case to an employment tribunal.

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