Settlement Agreements

We are specialist UK employment lawyers with vast experience in advising on settlement terms, covering the whole of the UK. We have worked with hundreds of employees to get the best deal possible. Let us guide you through the process, help you to understand the situation, and where needed, negotiate the terms.

Contact us for friendly, expert advice today.
REQUEST ASSISTANCE

Employment Partner and Founder of Julian Taylor Solicitors

We understand that leaving employment can be a stressful time and that you need to secure the most favourable terms you can to protect you financially and reputationally. 

People are at the heart of what we do and with nearly 80 years of employment law experience between us our team is a great option.

At Julian Taylors you can be confident you will have expert adviser to guide you through your settlement agreement so that you understand it fully. 

We will guide you through the process and provide prompt, approachable and tailored advice. 

Where the agreement isn’t right for you we can advise you on how best to negotiate a better deal and often negotiate better terms on behalf of our clients
Employment solicitor

Julian Taylor

Julian partner at Settlement Agreement
Financial Consultant
Julian Taylor
Company Founded
Employment Solicitor

About Us

We are a specialist boutique employment law firm located in the Thames Valley, just a small jump from London.

More about our business

We have advised countless employees in many different sectors on their settlement agreement terms, including issues like the appropriate level of compensation, taxation of payments, bonuses and share options on termination, references and announcements, and more. We are well known for our expertise as well as our friendly and approachable style.
Learn More »
Specialists in Settlement Agreements
12 Hours Average Response Time
80 Years Experience Within Our Team
Based In The UK
Advising individuals and businesses
Settlement calculator
There are lots of issues with the typical settlement calculators you may find on the web. Whilst we love the idea of them – of course people want a tool to calculate potential rewards without any hassle - they often over simplify the position and can give a confusing outcome. 

We’ve detailed more on this on the link below.
CALCULATE
Costs
Because an employer is getting the benefit of a binding waiver of your employment claims when you sign up to a settlement it is customary for the employer to pay some, if not all, of your legal costs in taking advice.

We’ve detailed some more information on typical legal costs associated with settlement agreements.
COSTS
TAX INFO
There is generally a tax exemption that allows up to £30,000 of an ex gratia termination payment to be paid without deductions for tax and national insurance. It isn’t always this straight forward and the position will depend upon your circumstances and the payments being made. 

We've outlined more information on the link below.
TAXES

Have you been offered a Settlement
Agreement from by your employer?

A Settlement Agreement (formerly known as a compromise agreement) is a legally binding contract made between an employer and an employee or former employee.

It will generally set out terms for a parting of ways between the parties, and once signed, prohibits the employee from bringing legal action against the employer in relation to their employment or its termination – in other words it is usually a full and final settlement that cannot be undone.

This waiver of claims is usually in exchange for a termination payment made to the employee, and sometimes other benefits such as the provision of a reference or the ability to retain certain equipment.

This kind of contract is only binding if you receive independent legal advice on the content, usually from a qualified solicitor who signs off a certificate attached to the agreement to confirm they have given you the required advice. Read more – What is a settlement agreement? Read more - what is a settlement agreement?
Help with settlement agreements
Our employment & HR solicitors
We are an established Employment law firm advising clients in London, the Thames Valley and throughout the UK.

We specialise in settlement agreements and are drafting and advising upon them daily. 

Because we act for both employers and employees we have seen both sides and are tactically aware of how best to advise you. 

Do contact us for assistance.

Total years experience dealing with Settlement Agreements across team of staff
80 years
Average response time
12 hours

Common questions about Settlement Agreements




Here are a few of the common questions we're asked about settlement agreements. If you have a different question that you can't find the answer to below, please don't hesitate to send us a message and we'll see how we can help.

What is a settlement agreement?

A settlement agreement is a binding contract between an employee and their employer (or former employer) under which the employee agrees to waive their rights to pursue claims against their employer, usually in return for some kind of enhanced compensation payment.... click here to read more.

What are the benefits of a Settlement Agreement for both parties?

In most cases the benefit of a settlement agreement for you is the payment of an enhanced sum of money to help you to move on from your role – a financial cushion from which you can look for a new job.... click here to read more.

When might settlement agreements be offered?

Settlement agreements are offered in a variety of situations, from redundancy situations to performance or conduct issues, due to a grievance that has been raised, or due to legal proceedings against an employer... click here to read more.

Is a settlement agreement the same as an NDA?

A settlement agreement is a contract between an employer and employee (or former employee) designed to settle workplace claims. An NDA (non-disclosure agreement) is the name given to an agreement, usually in a commercial context, where the parties agree terms to safeguard their commercially sensitive confidential information.... click here to read more.

What does “without prejudice & subject to contract” mean?

You will often see this heading written on the top of settlement agreements or correspondence relating to negotiations or an offer of a settlement.... click here to read more.

What is a “protected conversation”?

A “protected conversation” (under section 111A of the Employment Rights Act 1996) is a way for your employer to have an “off the record” conversation with you to explore options for you to leave the business, even if there isn’t technically any dispute between you... click here to read more.

What is an ex- gratia payment?

An ex-gratia payment is a payment made to an employee (or former employee) by an employer where there is no legal obligation for such a payment to be made. It is the name given to describe a payment that is over and above the sums you are entitled to receive... click here to read more.

What are the usual terms of settlement agreements?

As well as compensation in return for a waiver of claims it is likely that the agreement will include terms dealing with you handing back your employer’s property, the reference you can expect to receive, non-disclosure and confidentiality obligations, and any post-termination restrictions that could impact on what jobs or activities you can do in future... click here to read more.

What factors affect settlement payouts?

The level of payment that you can reasonably expect will depend on a range of factors, including age, length of service, salary, benefits, notice period and others.... click here to read more.

What is an average settlement agreement payout?

Each case depends on its own facts. Comparing, or trying to look at averages isn’t very helpful in these circumstances because in each case it will depend on the context and particular leverage of the parties. There is no one size fits all. Our experience in handling hundreds of settlement agreements means we are well placed to advise you on your specific deal.

Who drafts a settlement agreement?

The employer (or their solicitor) will usually draft the terms of the proposed settlement.

How long should I be given to consider the offer of a settlement?

You do not have to accept a settlement agreement, and you should never feel forced into accepting terms.

For a settlement agreement to be binding it is a legal requirement that you take legal advice on its terms (and your adviser will need to sign a certificate, usually annexed to the agreement, to confirm that you have received that advice). We are experts in this field and frequently advise employees on the terms of settlements so that they can be sure they understand the terms and are getting the best deal for them.

You need to be given enough time to obtain that legal advice. There is ACAS guidance that, as a general rule, ten calendar days should be allowed to consider the proposed formal written terms of a settlement agreement and to receive independent advice, unless the parties agree otherwise. This is not a concrete rule, and in certain cases a shorter time frame may well be given, but 10 days is a good rule of thumb. As advisers we are used to turning these things around quickly to ensure any deadlines are met.

Will my employer cover my costs?

Because an employer obtains the significant benefit of a waiver of claims, and because the employee has to take legal advice on the deal, it is customary for the employer to cover, or at least make a contribution towards, the employee’s legal fees.

How does a settlement payment compare with a tribunal award?

Unless you have a generous employer the context for any settlement is likely to take into account the likely award in any employment tribunal or court proceedings. It is often better to settle earlier for a certain sum without incurring the costs associated with legal proceedings.

How much should you get for a redundancy settlement?

There are a number of factors in play here:

1. Your notice period and whether you are expected to work your notice period;
2. There is a minimum statutory redundancy payment calculated with reference to your length of service and age – the government’s calculator can be found here - https://www.gov.uk/calculate-your-redundancy-pay ;
3. Whether your employer has a more generous approach to redundancy payments – some employers enhance the statutory calculation;
4. Whether your selection for redundancy or the process adopted was unfair – in these circumstances you will have a claim for your losses flowing from that unfair dismissal including lost income.

How do I ensure my settlement agreement is legally binding?

A waiver of statutory employment rights claims in a settlement agreement will only be valid if the employee has received independent legal advice on the effect of the agreement, and in particular on their ability to bring the claim(s) in question.

Will you be taxed on the ex-gratia payments in your Settlement Agreement?

An ex gratia payment is a payment made by the employer without any contractual obligation to do so. For instance it will not include notice periods or holiday. The first £30,000 of any ex gratia payment may be paid tax free.

If you have been made redundant, will redundancy payments be payable tax free?

The statutory redundancy payment will be paid tax fr4ee. Any other elements of the redundancy payment will be subject to the usual tax rules. So sums contractually due will be taxable and genuine ex gratia payments up to £30,000 will be payable tax free.

What about pension contributions?

Subject to annual allowances pension contributions can be paid tax free.

Will your pay in lieu of notice be taxable?

Yes.

Will your salary, bonus and benefits be subject to tax as normal?

All contractual sums will be taxed as normal.

What is Post Employment Notice Pay (“PENP”)?

PENP is a statutory calculation to assess what tax should be payable on a termination payment. To the extent that a payment can be attributable to the period of notice that should be given under the contract the payment will be taxable. PENP is the basis for the HMRC tax calculation.

If you have accrued but untaken holiday, will the pay in lieu be taxable?

Yes

Are contributions to outplacement services taxable?

Payments for re-employment counselling and similar training for employees can be tax free if they fall within the tax exemption for counselling services provided by the legislation.

Should the consideration payment for restrictive covenants be subject to deductions?

Restrictive covenants seek to restraint the employee from competing after termination of employment. If there are new restrictive covenants in the settlement agreement then the only way they can be legally binding is if a payment is made by way of consideration. That payment will be taxable.

Taxation of share options and share awards

Such payments will be subject to the tax rules applicable to the scheme in question.

Can payments for personal injury and injury to feelings following discrimination be paid tax free?

These can be paid tax free in certain circumstances and advice should be taken.

What if the termination payments stagger a tax year?

The general rule is that there can only be one £30,000 ex gratia payment for termination. The tax to be paid on the taxable element of the settlement will be calculated with reference to the tax year in which it is paid or the employee can require it to be paid.

What Legal fees are involved with a Settlement Agreement?

A contribution to legal costs incurred solely in connection with a termination of employment where a settlement agreement is agreed between employer and employer may be paid tax free by the employer subject to certain HMRC rules.
GET  IN TOUCH

Contact Us

This website contains a summary of various aspects of employment law. It is not intended to provide legal advice for specific cases. No liability is accepted for reliance on any of the information on this website. If advice is required please contact the firm. Settlement Agreements UK is the trading name of Julian Taylor Solicitors Limited, a company registered in England and Wales with registration number 7171586. Julian Taylor Solicitors Limited is recognised and regulated by the Solicitors Regulation Authority and all of its directors and members are solicitors of England and Wales.

Julian Taylor Solicitors Limited is recognised and regulated by the Solicitors Regulation Authority with registered number 533592 www.sra.org.uk
cyber-essentials