What is a Settlement Agreement?

January 16, 2021 10:18 am - Categorised in:

A settlement agreement is a binding legal agreement between you and your employer which usually brings your employment to an end, or compromises certain claims you may have against your employer. In exchange for entering into the agreement you will usually be paid a sum of money by your employer.

Director Ben Bourne is based at our Beeston office and has 11 years’ experience in employment law.

Director, Ben Bourne, explains how a settlement agreement works and what you need to know if you have been offered one:

Why do employers offer settlement agreements?

“Your employer may offer you a settlement agreement for a variety of reasons. It may be you are offered a settlement agreement to settle a dispute between you and the employer, or as a way of reaching an agreement for you to leave your employment.”

What does a good settlement agreement look like?

“Your employer should always pay you your contractual notice pay, or at the very least your statutory notice pay. It is worth checking your contract of employment to see what notice entitlement you have. You should also be paid a sum in relation to your accrued outstanding holiday pay. Normally, employers will also pay an ex gratia compensation figure for you losing your job, which should be free from tax up to a value of £30,000. Your employer should also provide you with a reference.”

Why do I need a solicitor?

“In order for the agreement to be legally binding the employee must have received independent legal advice on it. An employer will normally contribute a fixed sum in costs towards the employee’s legal costs.”

At Ellis-Fermor & Negus, our specialist team of employment lawyers offer sympathetic and easy to understand advice. Our aim is to make the process as simple as possible.

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About Ben Bourne

Ben Bourne is one of our directors and works within our Commercial Litigation and Charity Law departments. Ben is a member of the Charity Law Association and has also served on a number of Charity Trustee Boards.

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