Legal Guide: What you need to know before signing a Settlement Agreement

What you need to know before signing a Settlement Agreement

POSTED 26/10/17

What is a settlement agreement?

In simple terms a settlement agreement is a contract. You are receiving a payment (known as a consideration) in return for not bringing a claim against your employer.

Am I being offered the right level of compensation?

Your solicitor can address the question of whether the payment offered is reasonable in your particular circumstances. This will be dependant on your length of service, performance record, history of any disciplinary action, potential redundancy situation, contractual notice period and any additional contractual entitlements, such as commission.

What happens to my private medical insurance?

If you have private medical insurance with your employer this will end when you sign your settlement agreement, unless clearly stated otherwise. If you or anyone else who was covered by the policy has received treatment in the past 12-24 months this could affect other policies you seek to take out in future, and you should discuss this with your provider.

Can I talk about my settlement agreement with anyone outside my immediate family?

No. There are usually very strict clauses in agreements in regards to confidentiality and you should not disclose the terms of the agreement to anyone other than your legal/financial advisers and immediate family. If you do so and your employer is able to prove you have breached the agreement you may lose some or all of the money being paid to you.

What are the key points I should be looking for in my settlement agreement?

Ensure that it is factually correct in terms of date, addresses, holiday accrued but not taken, and the amount of compensation agreed. Make sure that you are happy with any work references being offered (information you will provide to future employers). Often such references only refer to dates worked and type of role, but you have the right to request a more detailed document highlighting your skills and work ethic etc.

What happens once I employ a solicitor to help handle my settlement agreement?

Unless your employer makes any specific request, once your solicitor has provided advice regarding the terms of the draft settlement agreement, and you are happy to proceed, your solicitor will sign and return the draft agreement to your employer by electronic copy (and via hard copy if required). You will be asked to sign copies for your employer/HR contact who will place copies of the adviser’s certificate (a declaration from your solicitor about the advice offered to you) with each, sign both, and then return one to you and retain one for their own records.

If I sign the agreement does it mean I can never bring any type of claim against my employer?

No. You still have the right to ‘reserved claims’. This mean you can still:

  • 1. Make a claim to enforce the terms of the agreement.
  • 2. Make a claim in respect to personal injuries you may have suffered at work.
  • 3. Make a claim in relation to your pension – say for example your employer was refusing to pay what you are owed.

Please note that these guides are for informational purposes only, and do not constitute legal advice. You can contact one of our expert consultant lawyers using the form below.

James Wilkes
James Wilkes


“Your Settlement Agreement is an important document that cannot later be changed – make sure you get it right before you sign. We would always advise you to take professional advice before agreeing to the terms being offered.”

Enquire now