Jessica Thrower
Employment Advice (For Individuals)
What Should you Expect to see in your Settlement Agreement?
If you have been given a Settlement Agreement by your employer, the document itself can often appear confusing.
These agreements are often many pages long, and can contain legal wording that you may not be familiar with.
Whilst every agreement is unique, there are some issues that will always be covered. These include:
- A termination date – this is the date when your employment will come to an end.
- Details of the payments that you will receive. In most cases this will include a redundancy payment or payment for loss of employment, a sum in respect of accrued annual leave (if you have leave untaken at your termination date), and pay in lieu of notice (PILON), unless you are working your notice period.
- A clause relating to the tax and National Insurance payable. Holiday pay and PILON will be subject to deductions, whereas redundancy pay or payment for loss of employment can be tax free up to £30,000.
- A waiver of claims – this means that in signing the agreement, you are settling any claims you might have against your employer in relation to anything that happened during your employment, or the way in which your employment is coming to an end.
- A requirement to return all property that belongs to your employer.
- A confidentiality clause about the agreement itself.
- An agreed reference.
Some agreements might also include the following:
- Restrictions around who you can work for following termination and / or contacting your employer’s customers once your employment has come to an end.
- Agreed wording for an announcement about your employment coming to an end.
A Settlement Agreement should not contain the following clauses:
- Anything attempting to waive claims in respect of your pension rights or a latent personal injury.
- Anything attempting to prevent you from making a public interest disclosure (“blowing the whistle”) or reporting a crime.
Related insights
Jessica Thrower
Sophie Williamson
Esther Marshall, specialist in Employment law, said:
“It is normal to feel confused or unsure about what the terms of your Settlement Agreement actually mean. In order for the agreement to be legally binding, you must take independent legal advice before you sign. Here at Mullis & Peake we have many years of experience in advising about Settlement Agreements. We will make sure that the agreement is correct, and that you understand it fully. Our approach to clients who need advice on Settlement Agreements is that there is no such thing as a stupid question!”