A Settlement Agreement (once known as a Compromise Agreement) is a legally binding contract made between an employer and an employee. It is designed to bring the employment relationship to an end on an amicable basis.

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The employer offers to pay a lump sum to the employee and also perhaps might agree to provide a reference and in return the employee agrees not to bring any legal claims against the employer to a Court.

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Basically, it is an agreed, amicable deal. The employer is able to draw a line under the matter knowing that the employee has legally agreed he / she will not bring any claims against the employer. So, the employer saves the costs, effort and management time of defending a court or employment tribunal claim and on the other hand the employee is able to walk away from the contract of employment with a pay off (part of which is tax free) and might even negotiate a reference.

 

The employee will therefore have some money at a time when he or she is out of work and does not need to worry about whether or not to make a claim against the employer. Instead the employee can spend his / her time looking for new employment.

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It is a legal condition that the employee must obtain independent legal advice from a solicitor and the employer usually pays the employee’s legal fees direct to his / her solicitor.

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Therefore, if you are an employer and would like to resolve amicably an employment dispute this way we will be pleased to help you .

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If you are an employee and you have been offered a Settlement Agreement you must obtain independent legal advice and your employer should pay our legal fee.

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Therefore please feel free to contact us for a free consultation.