Settlement Agreement FAQ's

A settlement agreement is a legally binding contract used by an employer to end an employment relationship on agreed terms with an employee. It sets out what happens when employment ends and usually includes a waiver where you agree not to bring certain claims against your employer in exchange for monetary compensation

Yes. Under UK law, a settlement agreement is only legally binding if you receive independent legal advice from a qualified solicitor or professional adviser. Your solicitor will explain the terms of the agreement and confirm that you understand your rights before you sign.

No. A settlement agreement is voluntary, and you should not feel pressured to sign the agreement. If you do sign, you may be giving up any rights to bring certain employment tribunal claims. Only sign once you understand the terms and you’ve had independent legal advice.

Most agreements cover your end date, notice (or pay in lieu), holiday pay, bonuses/commission, pension arrangements, return of company property, and how tax will be treated regarding any renumeration paid to you. It should also clearly list the claims you’re waiving and key terms like confidentiality and employment references.

Yes, and it’s usually worth doing. A common approach is to attach the reference wording to the settlement agreement so both sides know exactly what will be provided.

Timeframes vary. You may be given a deadline, but you should leave enough time for independent advice and any negotiation. If the offer feels rushed, it’s reasonable to ask for more time

Often, yes. Negotiations commonly focus on the compensation figure, how notice pay is handled, an agreed reference, confidentiality wording, restrictive covenants, and payment timing

In most cases, your employer pays the legal fees for settlement agreement advice, meaning there is no cost to you

Yes. An employment solicitor can negotiate settlement agreement terms on your behalf, including compensation, notice pay, restrictive covenants, and references. Negotiation may be limited if terms have already been agreed, but we will always advise you on what is possible.

Most settlement agreements can be reviewed within 24–48 hours. If negotiations are required, the process may take longer depending on your employer’s response and the complexity of the terms.

If you choose not to sign, the settlement agreement will not be legally binding and your employment rights remain unchanged. Your employer may then follow an alternative process, such as a disciplinary or redundancy procedure. We can advise you on your options before you decide.

You should never feel forced to sign a settlement agreement. If you are under pressure or have been given a short deadline, we can advise you on whether the timescale is reasonable and whether the agreement may be challenged.

• Employees are offered a settlement agreement to leave their employer without going to an employment tribunal
• If Redundancy exits
• All employees including Senior employees and executives
• Maternity-related or return-to-work disputes
• Performance or disciplinary exits
• Claims by employees of discrimination
• To prevent whistle blowing claims which may affect the employer's reputation

Once signed and legally valid, a settlement agreement usually prevents you from bringing most employment claims against your employer. This is why it is important to receive expert legal advice before signing

Tax depends on what the payment is for. Some termination payments can be paid tax-free up to £30,000, but notice pay, holiday pay and certain benefits are often taxable. It’s important the agreement accurately describes each payment correctly.

Most agreements cover your end date, notice (or pay in lieu), holiday pay, bonuses/commission, pension arrangements, return of company property, and how tax will be treated regarding any renumeration paid to you. It should also clearly list the claims you’re waiving and key terms like confidentiality and employment references

In most cases, your employer pays the legal fees for settlement agreement advice, meaning there is no cost to you.

We cover the whole of Scotland and we are regulated by the Law Society of Scotland

• We can ensure your employer pays your legal fees
• We can advise you on any terms of the settlement agreement that you are unsure about
• We can negotiate with your employer to secure you better terms – this is limited if you have already agreed settlement terms

• Speak to one of our settlement agreement solicitors today call 0131 5231540
• Get your settlement agreement reviewed
• Request a call back within 24 hours