Settlement Agreement Solicitors for Employees:
Independent Legal Advice on Employment Settlement Agreements

Employers often use settlement agreements to achieve a clean break and reduce the risk, cost, and management time involved in a dispute or termination process. Common situations where settlement agreements might be introduced include:

• Redundancy
• Performance or capability concerns
• Disciplinary issues
• Grievances or workplace disputes
• Senior exits
• Mutual agreements to end employment

For employees, a settlement agreement can offer certainty, speed, an agreed reference, and a financial package without the stress and delay of tribunal proceedings.

A settlement agreement is only legally binding if you receive advice from an independent adviser and the agreement meets the statutory requirements. That is one of the key protections built into the process for both employers and employees.

Because independent legal advice is required for the agreement to be valid, employers will usually agree to cover the cost of that advice or at least make a contribution towards it. Where the contribution offered is not enough to cover the work involved, we will usually try to agree an increased contribution with the employer in the first instance.

Taking legal advice helps you understand:

• What claims you are being asked to waive
• Whether the compensation is fair
• Which payments are taxable and which may be tax free
• Whether the reference wording protects your future job prospects
• Whether confidentiality or non-disparagement clauses are reasonable
• Whether any post-termination restrictions should be changed or removed

At TLW Solicitors, our experienced employment solicitors can explain the agreement in plain English and advise you on whether the terms reflect your circumstances.

Settlement agreements usually cover more than just the final payment you will receive from your employer. They often set out the full terms on which your employment will end, including what you will be paid, what rights you are giving up, and what both sides agree will happen after your employment has finished.

The financial side of the agreement will usually deal with matters such as:

• salary up to your leaving date
• payment in lieu of notice
• accrued but untaken holiday pay
• bonuses or commission, where applicable
• a compensation payment, sometimes described as an ex-gratia payment

It is important to understand that not all payments are treated in the same way for tax purposes; some elements, such as salary and holiday pay, are normally taxable, while some compensation payments may be paid tax free up to £30,000 depending on how the agreement is structured.

A settlement agreement may also include a number of non-financial terms, which can be just as important in practice. These often cover matters such as:

• an agreed reference
• confidentiality clauses
• non-disparagement terms
• the return of company property
• post-termination restrictions
• garden leave arrangements
• outplacement or career support

These provisions can have a real impact on what happens next, particularly if you are moving into a new role and want to protect your reputation, your future opportunities, and the way your departure is handled.

The first draft of a settlement agreement is not always the best or only version; in some cases, there may be scope to improve both the financial package and the wording of the terms before anything is signed.

Depending on your circumstances, it may be possible to negotiate changes such as:

• a higher compensation payment
• a greater contribution towards legal fees
• more favourable reference wording
• clearer or more balanced confidentiality terms
• mutual non-disparagement wording
• a later termination date
• continued benefits for a longer period
• changes to restrictive covenants

Whether those improvements are achievable will depend on the facts of your case; this can include your length of service, your salary and notice entitlement, the strength of any potential claims, and the extent to which your employer wants to avoid the time, cost, and uncertainty of a dispute.

That is why legal advice is so important: a solicitor can help you understand whether the offer is reasonable, identify areas where the wording could be improved, and negotiate changes where appropriate.

If you have been offered a settlement agreement, it is important to understand exactly what it means before you sign. Even where the document appears straightforward, the wording can affect your legal rights as well as the payments you receive and the way your employment ends.

The employment team at TLW Solicitors can help you understand the agreement clearly and advise you on whether the terms offered are reasonable in your circumstances. We can also identify any clauses that may cause concern and, where appropriate, negotiate amendments on your behalf.

Our solicitors can assist with:

• reviewing the agreement in full
• explaining the legal effect of the terms in plain English
• advising on the fairness of the financial package
• identifying the claims you may be giving up
• explaining the tax treatment of payments
• negotiating improvements to financial and non-financial terms
• advising on references, confidentiality clauses, and restrictive covenants
• signing the adviser’s certificate once advice has been provided

In many settlement agreement cases, your employer will pay, or contribute towards, the cost of the legal advice you need to sign the agreement. Where the contribution offered is not enough to cover our fees for advising on the agreement, we will usually aim to negotiate a higher contribution from your employer before asking you to meet any shortfall yourself.

If you would like us to go further and negotiate an improved financial package or better terms on your behalf, this will usually be treated as additional work outside the standard advice required to sign the agreement. In those cases, we charge a success fee of 30% plus VAT of any increase we secure for you. For example, if your employer originally offers £10,000 and we negotiate that figure up to £15,000, the increase achieved is £5,000 and our fee would therefore be 30% plus VAT of that £5,000.

This is broken down as follows:

30% of £5,000 = £1,500

20 % VAT on £1,500 = £450, meaning our total fee would be £1,950, leaving you with over £3,000 in additional compensation.

Our role is to make sure you understand what you are being asked to sign and that the agreement properly reflects your interests before matters are concluded.