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Employment Law > Settlement Agreements

Settlement Agreements

Settlement Agreements are currently the most commonly used method to bring your employment to an end. If your employer is proposing a Settlement Agreement to you, it is vital that you seek legal advice from a specialist Employment Solicitor at the earliest opportunity.

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Please note that before the introduction of the Enterprise and Regulatory Reform Act 2013, Settlement Agreements were known as Compromise Agreements. If you have been advised by your employer that you should seek legal advice regarding a Compromise Agreement, then your solicitor may now refer to this document as a Settlement Agreement.


Nowadays, settlement agreements are the most widely used method to bring someone’s employment to an end. A properly constructed and negotiated settlement agreement allows both employer and employee to part on terms that are amenable to both parties.


The use of a settlement agreement to end someone’s employment is relatively common, however the complexities of many contracts of employment makes it very important to use the services of someone with the appropriate legal experience, such as a specialist employment solicitor.


Why is it important to get advice from an Employment Solicitor?


Settlement agreements have to address every element of an employee’s contract of employment as well as any other benefits enjoyed by the employee. A well structured settlement agreement will allow the employee to leave their current employment safe in the knowledge that their contractual benefits, pensions and share options will be protected and with the peace of mind that restrictive covenants or taxation will not impact adversely their future ambitions.


If your employment relationship is coming to an end, for whatever reason, it is vital that you seek legal advice at the earliest opportunity. By instructing an employment lawyer at Canter Levin & Berg, you can ensure that you get the best possible terms in your settlement agreement, allowing you to achieve not only enough remuneration to ease the transition from one position to another, but also giving you a measure of security for the future.


We can advise you on the effect of the terms on your benefits, bonuses, share options, restrictive covenants, taxation and remuneration. We can also provide you with advice and representation during any negotiations with your employer so that at all times, you will know what you stand to gain from the agreement and also the compromises you have to make.


How will a settlement agreement affect my rights?


A settlement agreement is only valid if you have taken advice from an appropriately qualified person. You must take independent legal advice so that you are fully aware of the terms in your settlement agreement and how they will affect your rights, such as your right to take your employer to an Employment Tribunal.


In order to be valid, the settlement agreement must be in writing. It must also identify the person who has given you legal advice (the advisor) and specify that they have professional indemnity insurance to cover them against any legal action you might take in the event that you receive incorrect advice about your settlement agreement.


What will my settlement agreement cover?


When receiving advice on your settlement agreement, you should discuss the terms your employer is offering with your solicitor before you sign the agreement. It is important that your settlement agreement covers, as far as is possible, what will happen to any bonuses you may have been eligible for as well as other benefits your employer may have provided, such as a company car, a mobile phone, medical insurance and a company pension.


Your solicitor will also make sure the agreement addresses what will happen to any shares you hold in your employer’s business, or any share options. If you signed up to a life assurance policy through your work your settlement agreement should cover what will happen to this policy after you leave employment, and also what will happen to any holiday pay you might be entitled to for holidays you have not yet taken or will not be able to take before your current employment comes to an end.


Whilst it will not apply to all employees, a settlement agreement can address what, if any, public comments your employer will make when you leave their employment. This can include agreeing the text of any press releases mentioning your departure, or comments made by your employer or their representatives to the media or to industry publications.


Lastly, your solicitor will make sure that your settlement agreement mentions your tax liabilities, as any monies you receive from your employer as part of your settlement agreement may be treated differently for tax purposes than if the money had been paid out as part of your salary. This also includes situations where your employer makes a payment in lieu of your contractual notice period; as such a payment may be made tax free.


Legal advice and representation from employment solicitors


Here at Canter Levin & Berg Solicitors, we have a great deal of experience in dealing with complicated employment law issues, having helped employees across the UK for over 30 years. During that time we have provided legal advice and representation thousands of people leaving employment under the terms of a settlement agreement, making sure that they understood fully the terms of the agreement they were entering into and how it would affect them.


If your employer has indicated they wish to end your employment through the use of a compromise agreement or settlement agreement, call the employment solicitors at Canter Levin & Berg today on 0151 239 1000. Our employment solicitors offer a free no-obligation 10 minute consultation over the phone, or a longer face-to-face meeting with prices starting from £100 inclusive of VAT for 30 minutes, so call today to find out how we can help.