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Settlement Agreements

What is a Settlement Agreement?

A settlement agreement is a formal contract concluded between an employer and employee, to compromise an employee’s contractual and statutory claims on the termination of their employment (formerly these documents were known as a compromise agreements).

Settlement Agreements are essentially a way for you and your employer to “part company” on certain agreed terms, without giving rise to a claim against the employer for a breach of the employees’ employment rights.

Under the terms of the agreement, you will set a date for the termination of your employment, and give up your right to bring any claims whatsoever against your employer relating to your employment with them, subject to you receiving suitable compensation in recompense of the loss of your employment rights.

What is the benefit to me?

The compensation paid should be commensurate with the employee’s salary, position within the company and length of service.

Compensation typically is given in the form of an agreed lump sum, ex-gratia payment and further sums can be paid to the employer, for example a payment in lieu of notice, a payment in lieu of any contractual benefits and payment for any accrued but untaken holiday entitlement up to the agreed termination date for the contract of employment.

Can they be used to terminate my employment?

Settlement agreements can be used to terminate your employment, but are also a means of settling an ongoing claim that you are bringing against your employer before a court or Employment Tribunal. Both you and your employer are able to suggest a settlement agreement and to enter into confidential discussions about the proposed terms.

Is a termination agreement the same as a settlment agreement?

Many different names and terms are used for them; termination agreements, compromise agreements, mutually agreed resignation terms, ex-gratia payments and ‘golden goodbyes’. The proper legal term is settlement agreements.

Do I need a Solicitor for a Settlement Agreement?

It is essential that an employee receives independent legal advice from a suitably qualified person before finalising and signing a settlement agreement.

What would it cost and how can I pay for it?

The costs of an employee obtaining advice on a settlement agreement should be met by your employer, and the agreement itself should contain a separate clause making an allowance for you of the costs to seek independent legal advice before committing yourself to entering into the agreement.

How we Laker Legal help?

Here at Laker Legal Solicitors we have experienced Solicitors available in Bath, Lancaster, Preston, Maidstone and Kings Hill along with York who can guide you through the process of entering into a settlement agreement, review the proposed terms and provide you with confidential advice and support. All of which can be carried out without the need to set up a face to face appointment.

Please contact us to discuss your matter further and to see how we can help you.


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Jess was fantastic, in her communication during the process as well as her knowledge and ability during the conveyancing process. She helped me make informed decisions and ultimately find and purchase a wonderful home near Bath. Jess is adept at spotting potential issues during a purchase that I believe others may not.

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I am very pleased with Laker Legal firm, my Solicitor John Hirst, was extremely helpful throughout the drawing of my prenuptial agreement. A very professional and knowledgeable approach yet warm,and friendly enough to feel comfortable with in a situation that can be quite uncanny to discuss or uneasy as per say. Thankyou again!

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