Your employer has offered you a settlement agreement. It may have arrived after a difficult conversation, during a redundancy process, or entirely out of the blue.
Two things are worth knowing straight away. First, the agreement is not legally binding until you have taken advice from an independent adviser — that is a statutory requirement, not your employer's preference. Second, your employer will normally contribute to the cost of that advice, and in most cases the contribution covers our fee in full.
What a settlement agreement is
A settlement agreement is a legally binding contract between you and your employer. In it, you agree to waive your right to bring specified claims — usually including unfair dismissal, discrimination, and breach of contract — in exchange for something, normally a payment.
They were previously called compromise agreements; the name changed in 2013 but the legal framework is broadly the same.
Employers use them to draw a line under the employment relationship with certainty. Once you have signed, you generally cannot bring the settled claims to an employment tribunal, even if you later discover you had a strong case.
That finality is the point, and it is why the law requires you to receive independent advice first.
The statutory requirement
Under section 203 of the Employment Rights Act 1996, an agreement waiving employment rights is void unless certain conditions are met. In summary, the agreement must:
- be in writing
- relate to a particular complaint or proceedings
- be signed after you have received advice from a relevant independent adviser on the terms and effect of the agreement, and on its effect on your ability to bring a tribunal claim
- identify that adviser
- state that the statutory conditions are satisfied
The adviser must also carry professional indemnity insurance covering the advice, and must not be acting for your employer.
A "relevant independent adviser" can be a qualified lawyer, a certified and authorised trade union official, or a certified worker at an advice centre. If those conditions are not met, the waiver has no legal effect — which is why your employer needs this as much as you do.
Why your employer pays
Because the agreement is worthless to them without it. They cannot obtain a binding waiver unless you have taken independent advice, so they contribute to the cost of you getting it.
Contributions are usually stated in the agreement itself, commonly in the range of £350 to £750 plus VAT depending on complexity. In the majority of straightforward cases, the contribution covers our fee entirely and you pay nothing.
Where it does not — for example if the agreement is complex, or if you want us to negotiate rather than simply advise — we will tell you before doing any chargeable work, and agree the position with you first. You will never receive an unexpected bill from us.
What we check in your agreement
Advising on a settlement agreement is not a rubber-stamping exercise. Here is what we actually look at.
Is the money right?
We compare what is on offer against what you might realistically recover if you pursued a claim, factoring in the strength of the claim, the cost and time involved, and the uncertainty of litigation. Sometimes the offer is generous. Sometimes it is well below what the situation warrants, and you should know that before signing.
How is the payment structured, and how is it taxed?
Structure affects how much you actually receive. Broadly, compensation for loss of employment can benefit from a £30,000 tax exemption, while notice pay is taxable as earnings — and post-employment notice pay rules mean amounts representing notice are taxed even if labelled otherwise. Holiday pay, bonuses and contractual payments are taxable in the normal way.
We will explain how your particular payment is likely to be treated. For complex tax positions we would suggest confirming with an accountant.
What claims are you waiving?
Most agreements waive a long list of claims. We check the list is appropriate, and that anything that should be carved out is carved out — for example, accrued pension rights, personal injury claims you do not yet know about, and your right to enforce the agreement itself.
Certain rights cannot be waived at all. You cannot be prevented from making a protected disclosure (whistleblowing), reporting a criminal offence, or co-operating with a regulator. If your agreement appears to attempt this, we will raise it.
Confidentiality and non-derogatory clauses
Almost all settlement agreements include confidentiality provisions. We check they are mutual where they should be, that they contain the required carve-outs, and that you are not agreeing to something you cannot realistically comply with — such as concealing the agreement from your spouse or your accountant.
Restrictive covenants
Look closely here. Some agreements reaffirm existing post-termination restrictions; others introduce new or wider ones. A covenant that limits who you can work for next has direct financial consequences, and it is often the clause with the biggest long-term impact.
The reference
Is a reference agreed? Is the wording attached to the agreement? An agreed, appended reference is far more valuable than a promise to provide "a reference in due course".
Everything else
Return of property, resignation of directorships, share options and vesting, continuation of benefits, announcement wording to colleagues, and the date the payment must be made.
If the agreement is not good enough
We will tell you if we think the terms fall short. That is part of the job.
Options include accepting as offered, asking for specific amendments — a better reference, narrower covenants, removal of an unfair clause — or negotiating on the payment itself.
Negotiation goes beyond the scope of a standard employer-funded review, so we will always discuss cost with you before starting. In many cases a short, well-targeted negotiation recovers considerably more than it costs. In others it is not worth it, and we will say so plainly rather than run up fees.
The process
1. Get in touch. Call 01628 777233 or email enquire@jscottlegal.co.uk. Tell us any deadline your employer has set.
2. Send us the agreement and any covering letter, plus your contract of employment if you have it.
3. We review it properly before the appointment.
4. Appointment — usually 45–60 minutes, video or in person. We go through the agreement clause by clause and answer your questions.
5. Amendments if needed. We advise on what to ask for and can raise it with your employer's solicitors.
6. You sign when you are satisfied.
7. We complete the adviser's certificate and return the signed agreement.
Typical turnaround: 2–5 working days. Faster if your deadline requires it.
About employer deadlines
Employers frequently impose short deadlines — sometimes 48 hours. The Acas Code of Practice on settlement agreements suggests a minimum of 10 calendar days to consider a proposed agreement and take advice, unless the parties agree otherwise.
If you are being pressured to sign faster than you are comfortable with, tell us. Asking for a few more days is normal and reasonable, and employers usually agree.
Fees
| Service | Fee | VAT | Who pays |
|---|---|---|---|
| Standard settlement agreement advice | clear fee — please contact us for a quote | clear fee — please contact us for a quote | Employer contribution, usually in full |
| Complex agreement (share options, multiple claims) | clear fee — please contact us for a quote | clear fee — please contact us for a quote | Employer contribution + agreed top-up |
| Negotiation of improved terms | clear fee — please contact us for a quote | clear fee — please contact us for a quote | Agreed with you in advance |
In most straightforward cases you pay nothing. We will confirm the position at the outset, and we will not carry out chargeable work without your agreement.
Frequently asked questions
Do I have to accept the settlement agreement? No. You can reject it and remain employed, or reject it and pursue a claim if you have grounds. Your employer cannot force you to sign, and refusing to sign is not in itself a fair reason for dismissal.
Will it really cost me nothing? In most standard cases, yes — the employer's contribution covers our fee. If your matter is more complex, or if you want us to negotiate, we will tell you the cost before we start.
How long do I have to decide? The Acas Code suggests at least 10 calendar days. If your employer has given you less, you are entitled to ask for more time, and it is usually granted.
Can I still claim if I sign? Generally no, for the claims listed in the agreement — that is the point of it. Certain rights survive, including accrued pension rights, personal injury claims not yet known about, and the right to enforce the agreement itself.
Is my payment tax-free? Partly, potentially. Compensation for loss of employment may benefit from a £30,000 exemption, but notice pay and contractual payments are taxable. We will explain how your specific payment is likely to be treated.
What if I have already signed? Contact us anyway. If you signed without independent advice, the waiver may not be valid — the statutory conditions exist for a reason. There may be more scope than you think.
Can you negotiate more money for me? Sometimes, depending on the strength of your position. We will give you an honest assessment of whether it is worth pursuing before you spend anything on it.
Do I have to use a solicitor my employer suggests? No. Employers sometimes suggest a firm, but the choice is entirely yours — and an adviser you chose yourself is more obviously independent.
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