How do I get a settlement agreement? 
If you want a settlement agreement from your employer because you’ve been made redundant or mistreated at work, the first thing is to prepare your case. This means collecting all the written evidence that relates to your situation, such as your employment contract and copies of relevant emails and meeting notes.
It’s then wise to talk to a specialist employment lawyer like us – we can talk you through all the steps and explain what to expect.
The next stage is to approach your employer to start negotiations. If you want to do it yourself, you’ll find some advice below and in our other articles. Of course, if you need support, we’re here to help you, and it makes sense to get us involved early on.
Once they’ve made you an offer, you need to decide whether it’s a good one. Again, you’ll find plenty of advice below explaining what you can expect. This part of the process can be stressful and there are many issues to consider. With our experience we can help you negotiate the best outcome. It’s definitely the easiest way for you as an employee to handle the situation.
Ideally, you will eventually reach agreement with your employer. You’re then at the ‘settlement agreement’ stage. At this point you will definitely need to take independent specialist advice – it’s the law.
If you don’t reach agreement, you’ll have to take your case to the employment tribunal with all the implications that holds. Read on to find out more.
What is a settlement agreement?
A settlement agreement is a legally binding contract between you and your employer. They used to be called compromise agreements in England, Scotland and Wales. In Northern Ireland, they still are.
In return for your employer paying you a sum of money (the settlement), you agree not to take them to the employment tribunal.
Reaching early agreement reduces stress and delays for everyone. It’s in your employer’s interests to reach agreement, because it saves them the time, money and hassle of going to the tribunal. Avoiding the tribunal is in your interests too, because you get certainty and a clean break so you can move on.
Often, your employer will insist you keep the deal a secret. That means your settlement agreement might be described as a non-disclosure agreement or NDA.
Whatever it’s called, you don’t have to accept it if you don’t want to. If you do, you will need to take independent legal advice before you sign it. As employment lawyers, we can help with that.
When might I get offered a settlement agreement?
There are various situations when you might be offered a settlement agreement. Do any of these apply to you?
- Your role is being made redundant
- You’re going through your employer’s disciplinary and grievance process
- You’ve been accused of under-performing at work
- You’re in a dispute with your employer because they have treated you badly (through discrimination or unfair dismissal, for example)
What’s included in a settlement agreement?
Here are some of the things that might be included in the settlement you’re offered:
- Compensation
- Payment in lieu of notice (PILON)
- Redundancy pay
- Outstanding holiday and bonus pay
- Keeping your company car or mobile phone
- Keeping your private health insurance
- Other benefits
Other aspects may be included in the negotiation. For example, if you’re leaving your job, you can ask for a good reference to help you find new employment.
In return, your employer might want you to commit to:
- Not working for a competitor for a certain amount of time
- Not poaching their staff for your new business
- A promise not to ‘bad-mouth’ them
- Keeping the deal secret
You can negotiate with your employer until you’re satisfied with their offer. Negotiating can be scary but we can help with that.
How much might I get in my settlement agreement?
The amount you can expect depends on the situation.
- Were you made redundant?
If yes, there is a legal minimum. You’ll get more than that if the redundancy process was unfair (or if your employer is generous – some of them are).
Outside redundancy, there’s no legal minimum. The amount you’re offered depends on various things:
- Have you been employed there for two years or more (one year in NI)?
- Were you dismissed or forced to resign?
If you can say ‘yes’ to both those questions, you might get between three and six month’s salary plus notice pay. See the list below for all the aspects that can affect this.
- Have you got evidence of discrimination in the workplace?
- Have you ‘blown the whistle’ on unsafe behaviour by your employer?
If you answered ‘yes’ to either of those questions, you might get more than that (and you don’t have to be employed there for two years (or one year in NI)).
In the case of unfair dismissal, there is is a maximum amount you might get:
- Compensation up to one year’s salary or £93,878, whichever is lower (as of 6 April 2022)
- Basic award based on your gross weekly pay when you were dismissed, up to a maximum of £571 (whichever is lower) per year of service, capped at a maximum of £17,130 (as of 6 April 2022):
- 1.5 weeks’ pay per year of service from age 41
- 1 week’s pay for each year of service if you are 22 – 40
- 0.5 week’s pay for each year served if you are under 22
Every case is different. For a specific estimate, give us a call to talk through your own situation and we’ll advise.
Note that you might have to pay tax on the amount you get, depending on what it relates to:
- Unfair dismissal awards are tax-free up to £30,000
- Discrimination awards also include ‘injury to feelings’ and are normally tax-free
- Unpaid wages and notice pay are taxed as normal
When might I get more?
Settlement amounts vary based on:
- Your salary (the more you earn, the more you can claim)
- How long you’ve worked there (the longer you’ve been employed, the more you’re likely to get since your company knowledge and loyalty is greater and so you’re more valuable)
- The notice period stated in your employment contract (normally, you will be awarded enough money to keep you going until you find a new job)
- The size of the company (bigger companies have more money so can afford a long negotiation, however, they don’t like bad publicity. However, small companies might not have the resources to fight a claim)
- The status of the company (for example, public sector organisations seem to prefer going to the tribunal rather than settling out of court)
- If you have a specialist job (you’ll get more because it will be harder for you to find new work)
- If you are nearing retirement (you’ll get more because it will probably be harder for you to find another job)
- If you’re usually paid bonuses or commission (you’ll get more because we may be able to negotiate those into your settlement package)
- If you are disabled (you’ll get more because it can be harder to find work. Also, your employer may have to pay compensation if they didn’t make ‘reasonable adjustments’ for you)
- If you’re on a Performance Improvement Plan (you could receive your usual salary for the duration of the Plan because your employer will have to pay that anyway)
- If you’re on sick leave (you could get more so your employer doesn’t have to continue to pay you while you’re off)
- If you have evidence that you were discriminated against at work (you’ll get more, as long as you can prove it)
- If you have suffered a personal injury to your physical or mental health at work (you’ll get more. Personal injury can be hard to prove, but there is no upper limit)
- If you have submitted a grievance or a ‘without prejudice’ letter (there’s a chance you’ll get paid off more quickly so your employer can save themselves time)
- If you already have an employment lawyer on your side (you’re likely to get more because it shows your employer that you’re serious. We can also help you negotiate a better deal because we have the experience of doing this all the time)
When might I get less?
- If you are past retirement age (you’ll get less because you were due to retire anyway)
- If you already have another job (you’ll get less because you haven’t suffered as much financial loss)
- If you have already resigned (you’ll get less because your employer doesn’t have an incentive to ‘pay you off’)
- If you’re going through a disciplinary process at work (you’ll get less because your employer is likely to blame you for causing the problem)
What this means to you
If you’ve been treated unfairly at work, you have the right to receive financial compensation.
For your settlement agreement to be legal, you need to take independent legal advice from a specialist solicitor (like us). We will advise on the agreement your employer has offered you, help you negotiate a fair deal, and support you to take your case to the tribunal if necessary.
Of course, going to the tribunal can be costly. However, if you win, your employer will usually pay your share of the fees.
Give us a call and we’ll tell you your chances of winning, and how much you’re likely to be awarded.
As expert employment lawyers, we only ever act for employees (never for employers). We’re on your side.
Further reading
If you found this useful, you might also like to read some of our other articles on the subject:
- What is a settlement agreement?
- I’ve been offered a settlement agreement. What do I do?
- Is my settlement agreement legally binding?
- How do I request a settlement agreement?
- What NOT to do when you’re offered a settlement agreement
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