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A Guide to Getting The Best Out of Your Settlement Agreement

Settlement agreements are typically given to employees when they are being made redundant or leaving for some other reason and outline, in a legally-binding document, the terms of the agreement that have been reached. These include certain conditions such as waiving your right to bring legal claims against your employer in the future, usually in return for some form of enhanced payment.

The law states that you must take independent legal advice in order to make the agreement valid and, although they aren’t required by law to do so, most employers will cover or at least make a contribution towards your legal costs.

Check with your employer before engaging a lawyer as they may only be willing to cover the basics and for any additional advice – such as whether the agreement is a good or bad deal – you may end up footing the bill. Is it worth the investment? Read our top five tips below.

  1. You gain certainty on exactly what is being paid to you and when. Having this clearly set out in writing is better than a verbal promise or agreement and allows you to plan for the future. If you intend to negotiate the agreement your lawyer can provide more detailed advice as to whether the sums involved represent a good deal in the circumstances. If you do not want the stress of carrying out the negotiation yourself, they can act on your behalf and speak to or write to your employer or your employer’s legal representative.


  1. You can agree a reference. There is a common misconception that your employer is obliged to provide you with a reference but this is not the case (unless you work in a regulated role in for example financial services or the medical profession). A reference can be agreed with your employer and attached to a settlement agreement so that you know what to expect. Your lawyer can help make sure this is properly drafted.


  1. Your lawyer may be able to negotiate with your employer to vary or waive your restrictive covenants, allowing you to work for a competitor or deal with the same clients. This allows you the freedom to move on.


  1. Your lawyer can agree how your exit is managed and communicated. This is particularly important in difficult situations where your reputation is being threatened, such as where your performance or conduct has been questioned. You can agree how your exit is communicated to colleagues and if appropriate, externally.


  1. Loose ends can be tied up. You may have share option and bonus issues that will be determined in the future and a settlement agreement can clarify exactly what you will receive in terms of cash or shares and when you will receive it. You can also cover off issues such as how much holiday you are owed, if you are retaining any company property such as a mobile phone or laptop and what sort of handover will be required from you. It is always helpful to get clarity on all these issues.

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