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Settlement Agreements - Employees

Have you received a settlement agreement?

There are many different types of dispute that can arise during the employment relationship. These can sometimes be resolved by way of an agreement between the employer and the employee called a Settlement Agreement.

In essence, under the terms of such an agreement, the employee would agree to waive any right they had to take the matter further though an Employment Tribunal or court and in return the employer agrees to pay the employee a sum of money.

These types of agreement are often used in circumstances where the employer seeks to bring the employee’s employment to an end but without having to worry about the potential of going through an unfair dismissal case in an Employment Tribunal.

These types of agreement can also be beneficial to employees as a swift and amicable way of bringing their employment to an end receiving a sum of money as part of a severance terms. 

The current law relating to the taxable treatment of the sums of money paid under such an agreement provide that a termination payment that is not a contract to entitlement can be paid in this way up to £30,000 without attracting Tax or National Insurance. Certain sums paid for notice, holiday pay, bonuses etc. are usually taxable. In order for the agreement to be binding, it is a legal requirement for the employee to obtain independent legal advice with regards to the terms and effect of the agreement from a relevant legal advisor. It is common for the employer to pay a contribution towards the cost of this advice. 

Our specialist employment lawyers can meet with you, go through the settlement agreement and help you appreciate it's terms and effect. We can advise you on your legal position and, where necessary or required, help you with any potential negation or re-drafting of the agreement.

There are usually many other terms in the settlement agreement covering elements such as warranties, indemnities and other restrictions. We can advise you relating to these clauses to ensure that you fully understand and appreciate their implications and their affect on the proposed deal.

For more information on settlement agreements or for specialist employment law advice, please contact us at contact@duttongregory.co.uk or contact Mark Broad as head of our employment team.