What you should know about Settlement Agreements
When facing redundancy or the end of your employment, it’s essential to understand your rights and the legal implications of any settlement offer.
At Clarke & Son, our experienced settlement agreement solicitors in Basingstoke provide clear, practical advice to ensure you’re treated fairly and that your agreement protects your interests.
Our specialist team at Clarke & Son is here to help you. You can contact us at SettlementAgreements@clarkeandson.co.uk.
What is the purpose of a settlement agreement?
It settles an existing dispute, protects your employer against a future claim, or concludes a redundancy. You agree not to bring employment claims in a Tribunal in return for an ex-gratia payment or another benefit (for example, continued medical insurance or use of a company vehicle).
Do I have to accept a settlement agreement?
No, it is voluntary. Your employer should not put you under undue pressure, for example through harassment, bullying, intimidation or not allowing you reasonable time to consider the offer. This may amount to improper conduct and could make the negotiations admissible as evidence.
Can I waive all my employment claims in a settlement agreement?
Most statutory and contractual claims can, provided each is identified in the agreement. Exceptions include accrued pension rights, personal injury claims not known at signing, and claims to enforce the agreement itself.
What requirements must be satisfied for a settlement agreement to be valid?
To waive statutory claims, the agreement must:
- be in writing
- relate to particular complaints or proceedings
- identify the claims being settled
- name your independent adviser and record that they have given advice
- confirm the adviser holds professional indemnity insurance or equivalent cover
- state that the statutory conditions have been met.
Do I need legal advice on a settlement agreement?
Yes, it is a legal requirement. You must be advised on the terms and effect of the agreement by a relevant independent adviser: a qualified lawyer, a certified trade union official, employee or member, or a certified advice centre worker. Your adviser must be insured, independent of your employer, named in the agreement, and must sign an Adviser's Certificate.
How long should I be given to get legal advice?
There is no statutory minimum, but the ACAS Code of Practice recommends at least 10 calendar days from when you receive the written terms. You may need longer if you are disabled and need a reasonable adjustment, and a fresh 10 days is reasonable if the terms change substantially during negotiations.
Will my employer contribute to my legal fees?
Your employer is not obliged to, but usually offers a fixed contribution, payable once the agreement is signed. It normally covers advice on the terms and effect of the agreement only, not advice on potential claims or negotiating the terms.
Will I pay tax on an ex-gratia payment?
The first £30,000 can usually be paid tax-free; anything above that is generally subject to income tax and employer's National Insurance. Salary, notice pay, holiday pay and bonuses are taxed as normal. Only HMRC can confirm the position definitively.
What is a reaffirmation?
A short supplemental agreement signed on or shortly after your termination date, used where there is a gap between signing and leaving. It confirms you still accept the terms and waive any claims arising in the meantime. You will need independent legal advice on it.
Is a settlement agreement confidential?
Usually. A confidentiality clause (NDA) can cover the existence and terms of the agreement and other specified information, and should state clearly what can be shared and with whom (typically close family and professional advisers). It cannot prevent whistleblowing, reporting a crime to the police, or certain disclosures by victims of crime.
How are post-termination restrictions dealt with in a settlement agreement?
The agreement should state which restrictions in your employment contract (such as non-compete or non-solicitation) remain in force, which you are released from, and any that are amended, referring to the relevant contract clauses. Restrictions must protect a legitimate business interest and go no further than reasonably necessary.
What happens if I breach the settlement agreement?
Remedies depend on the term breached and may include damages, recovery of some or all of your payment, or enforcement of confidentiality or post-termination restrictions. If you bring a Tribunal claim, your employer can rely on the agreement and ask for the claim to be struck out.
Can I bring a companion to a settlement agreement meeting?
There is no statutory right, but the ACAS Code says employers should allow a work colleague or trade union representative to accompany you, and doing so is good practice. If you are disabled, a support worker may be a reasonable adjustment.
Can I negotiate a settlement agreement?
Yes. You do not have to accept the first offer. Common points of negotiation include the payment, the reference wording, the termination date and confidentiality terms.
How much should I expect in a settlement agreement?
There is no fixed formula. It depends on your length of service, the strength of any potential claims, your notice entitlement, accrued holiday, and how keen your employer is to avoid tribunal proceedings. Payments may include compensation for waiving claims, redundancy pay, pay in lieu of notice and holiday pay. Independent advice will help you judge whether the offer is fair.
Will signing a settlement agreement affect my benefits?
Possibly. The reason your employment ended can affect benefits such as Universal Credit and Jobseeker's Allowance, and a lump sum may count as capital. Universal Credit is affected if your savings exceed £6,000 and is generally unavailable above £16,000. Check with the DWP or an adviser before signing.
What happens if my employer breaks the settlement agreement?
Failing to pay, or giving a reference that differs from the agreed wording, is a breach of contract. You can claim in the county court (England and Wales) or the sheriff court (Scotland). Seek legal advice promptly.
Can I change my mind after signing a settlement agreement?
Generally, no. A valid agreement is legally binding and there is no cooling-off period. You may be able to challenge it if you signed under duress, were misled, or it does not meet the legal requirements, so seek advice immediately if you have concerns.
What should I check before signing a settlement agreement?
- the termination date and notice period
- the breakdown of payments and which are taxable
- that contractual entitlements (bonus, commission, holiday) are included
- the claims you are waiving
- the agreed reference
- confidentiality obligations
- post-termination restrictions
- the deadline for returning company property
- whether your employer is contributing to your legal fees.
Do I have to return company property?
Usually, yes. The agreement will list items to return (such as laptops, phones, passes, keys or vehicles), any information to delete, and a deadline. Failing to comply may breach the agreement.
Can I start a new job after signing a settlement agreement?
Generally, yes, subject to any notice or garden leave period and any restrictive covenants that survive termination or are kept in force by the agreement. Starting work during a period covered by pay in lieu of notice may affect its tax treatment, so discuss any new role with your adviser before signing.
What happens to my notice period?
You may work your notice, take garden leave (remaining employed but not attending work), or receive a payment in lieu of notice (PILON). Tax treatment differs: for PILON, your employer must calculate the taxable post-employment notice pay (PENP). Pay, bonuses, commission and holiday accrued during notice are taxed as normal.
Can I negotiate a reference?
Yes. Your employer is not obliged to give a reference, but an agreed reference is a common negotiated term, ranging from a factual statement of your dates and role to a fuller account of your duties and performance. The wording should be annexed to the agreement, with your employer undertaking to provide it to prospective employers.
What warranties might I be asked to give?
Typically, that you have not committed, and know of nothing amounting to, gross misconduct or other grounds for summary dismissal. If a warranty proves untrue, your employer may withhold or recover the payment and claim damages.
What are 'protected conversations' and 'without prejudice' discussions?
Settlement discussions are usually inadmissible in a Tribunal or court under either:
- the without prejudice principle, which requires an existing dispute and a genuine attempt to settle it; or
- section 111A of the Employment Rights Act 1996 ('protected conversations'), which applies even without an existing dispute but only to ordinary unfair dismissal claims, not discrimination or whistleblowing.
Neither applies where there has been improper behaviour (s.111A) or unambiguous impropriety (without prejudice), such as harassment, discrimination, intimidation or undue pressure.
What is a 'protected disclosure' and can whistleblowing claims be settled?
A protected disclosure is when you report certain wrongdoing in the public interest, such as a criminal offence, a health and safety risk or environmental damage; from 6 April 2026, this includes sexual harassment. Whistleblowing claims can be settled, but s.111A protection does not apply to them and any confidentiality clause must preserve your right to make protected disclosures. An NDA cannot be used to discourage you from raising concerns about wrongdoing.
Are there any recent changes affecting confidentiality clauses for victims of crime?
Yes. Under the Victims and Prisoners Act 2024, for agreements made on or after 1 October 2025, an NDA is unenforceable to the extent it stops you making permitted disclosures as a victim of crime (or if you reasonably believe you are one). These include disclosures to the police, a qualified lawyer, regulated support professionals and victim support services, regulators, the Criminal Injuries Compensation Authority, and close family for support.
What happens if a settlement agreement is not agreed?
The ACAS Code says you and your employer should seek to resolve matters by other means, such as a performance, disciplinary or grievance process. The settlement offer and discussions cannot be relied on in that process, and s.111A still prevents them being used as evidence in an unfair dismissal claim.
What is the difference between a settlement agreement and a COT3?
A COT3 is agreed through an ACAS conciliator, usually during early conciliation, and does not require you to take independent legal advice. A settlement agreement is negotiated directly with your employer and does. Both are legally binding.
Can I make a data subject access request after signing a settlement agreement?
Yes. The ICO has confirmed that signing a settlement agreement or NDA does not waive your data protection rights, and any term restricting your right of access is likely to be unenforceable.
Why choose Clarke & Son?
- Experience you can trust: Our team has decades of experience advising employees and senior executives on settlement agreement law.
- Local expertise: As trusted settlement agreement solicitors in Basingstoke, we’ve helped individuals across Hampshire and beyond reach fair outcomes.
- Personal service: We pride ourselves on being approachable, responsive, and thorough — ensuring you feel supported at every stage.
- Fast turnaround: We know time matters. Most agreements can be reviewed and approved quickly if all parties are aligned.
Contact our settlement agreement solicitors in Basingstoke
If you’ve been offered a settlement agreement, get in touch with our friendly and professional team today.
At Clarke & Son we’ll help you understand your agreement and protect your rights.
Simply complete the form below or email us at SettlementAgreements@clarkeandson.co.uk.