Non-reserved business legal services
It buys you finality — but only if the employee takes independent legal advice from a named adviser first. Miss that and you have paid the money and kept the risk.
You want a manager out without a three-month capability process and a tribunal claim waiting at the end of it. A settlement agreement buys exactly that: they give up specified claims, usually in exchange for a payment, and the matter is closed. But it only waives statutory claims if the employee has taken independent legal advice from a named adviser before signing. Skip that one step and you have paid the money and kept the risk.
That is the whole difference between a settlement agreement that works and an expensive piece of paper. Everything else — the figure, the reference, the confidentiality wording — is negotiation.
Finality, and nothing more. It is a written contract in which an employee waives listed claims, so those claims cannot go to an employment tribunal. It used to be called a compromise agreement.
Be clear about what it is not. It is not a shortcut around a fair process and it does not make an unfair dismissal fair; it buys an agreement not to litigate. It waives only the claims it lists, plus usually claims the employee does not yet know about. And some things cannot be signed away at all: accrued pension entitlements, and the right to make a protected disclosure about wrongdoing or report a crime. A clause that tries to gag whistleblowing is void to that extent and reads badly in front of a tribunal. Make the carve-out explicit — it costs you nothing and removes the argument.
To waive statutory employment claims the agreement must be in writing, relate to particular complaints, and be signed after the employee has received advice from a relevant independent adviser who is named in the agreement and covered by professional indemnity insurance. The advice has to be on the terms and effect of that agreement, which is why the adviser needs the final wording before signing the certificate.
There is no legal requirement to pay for that advice, but almost every employer contributes, because without it the waiver does not bite. State the contribution as a figure in the agreement, payable to the adviser against an invoice, rather than an open-ended promise. Refusing to contribute is a false economy: it slows everything down and risks the employee never taking advice at all.
Section 111A of the Employment Rights Act 1996 lets you discuss ending employment on agreed terms without the conversation being admissible in an ordinary unfair dismissal claim. It is narrower than most people assume: it gives no protection in a discrimination, whistleblowing or automatically unfair dismissal claim, and the protection is lost where there has been improper behaviour — undue pressure, threatening dismissal if the offer is refused, or refusing a reasonable period to consider it.
The Acas Code of Practice on settlement agreements points to a minimum of ten calendar days to consider the offer and take advice. Give at least that. Do not tell someone the alternative is being sacked on Friday.
Genuine compensation for loss of employment can often be paid free of tax up to £30,000 — the threshold in section 403 of the Income Tax (Earnings and Pensions) Act 2003. What trips employers up is not the number but what counts towards it.
Contractual sums are taxable as normal earnings and never sit inside the exempt slice: notice pay, accrued holiday, bonuses, anything the contract entitled them to. The post-employment notice pay rules bring unworked notice into charge even where the contract has no pay-in-lieu clause. Identify each element separately in the agreement and say how it is being treated. We do not give tax advice — have your accountant check the split before anyone signs. A tax indemnity from the employee is standard and worth very little in practice.
Made-up figures, not a real matter. An agency wants to part with a manager after a run of performance issues. It offers one month's pay in lieu of notice, a £9,000 compensation payment, an agreed reference and mutual confidentiality, and contributes £350 towards the employee's advice. The manager takes that advice, signs, and both sides move on. Notice and holiday are taxed as earnings; the £9,000 is treated as compensation. What an exit actually costs depends on the role, the service and the strength of the underlying claim.
Drafting a settlement agreement for an employer is non-reserved work, so we prepare it, work through the commercial terms with you and get the employment paperwork behind it in order. What we cannot provide is the employee's independent advice — that must come from a relevant adviser, and it goes to RHF Solicitors (SRA no. 324115) or to the employee's own adviser, because nobody should be advising both sides of the same exit. If the matter is already a tribunal claim, that is contentious work and it goes to RHF too. Buzz Legal Ltd is not a firm of solicitors and is not regulated by the SRA.
Tell us before the conversation, not after it. A settlement agreement is considerably cheaper and cleaner before a claim is issued than after, and the sequencing — protected conversation, written offer, ten days, advice, signature — is easier to get right the first time than to repair. Book a legal review, bring the role, the length of service and what has happened so far, and you will get the scope and fee in writing before anything starts. This is general legal information, not advice on your situation.
The documents behind an exit are covered in our guide to employment contracts for employers, and the clauses worth reaffirming on the way out are in are your restrictive covenants enforceable?. What routes to RHF is set out on services.
This is general legal information, not advice on your situation, and nothing here is wording you can rely on in an agreement. For advice tailored to your business, book a legal review. Buzz Legal Ltd is not a firm of solicitors and is not regulated by the SRA; it provides non-reserved business legal support, and reserved legal activities are carried out by RHF Solicitors, authorised and regulated by the Solicitors Regulation Authority (no. 324115).
Leave your email and we'll send the employer's settlement checklist — what to have ready before the conversation, and the five things that make a waiver fail.
You can draft the commercial terms, but the document will not do the thing you are paying for unless the statutory conditions are met. To waive statutory employment claims, a settlement agreement must be in writing, relate to particular complaints, and be signed by the employee after they have received advice from a relevant independent adviser who is named in the agreement and covered by insurance. Miss any of that and you have paid the money and kept the risk. We can prepare the ground and draft the employer's side; the employee's independent advice goes to RHF Solicitors or to their own adviser.
There is no legal requirement, but in practice employers almost always contribute, because without independent advice the agreement does not waive statutory claims — so the contribution buys the certainty you are paying for in the first place. A stated contribution towards the cost of the employee's advice is normal, and it is usually paid directly to their adviser against an invoice. Put the figure in the agreement and make it a contribution rather than an open-ended promise. Refusing to contribute at all slows everything down and risks the employee not taking advice, which leaves your waiver ineffective.
Partly, and getting the split wrong creates an HMRC problem later. Genuine compensation for loss of employment can often be paid free of tax up to £30,000. Contractual sums are taxable in the normal way, and that includes notice pay, accrued holiday, bonuses and anything the contract entitled them to. The post-employment notice pay rules mean unworked notice is generally taxable even where the contract has no pay-in-lieu clause. The agreement should identify each element separately and state how it is being treated. Have your accountant check the split before it is signed rather than after.
The Acas Code of Practice on settlement agreements suggests a minimum of ten calendar days to consider a proposed agreement and take advice, unless both sides agree otherwise. Give at least that. A rushed signature undermines the agreement, reads as pressure, and can support an argument that the conversation was not a protected one. It also tends to slow the whole thing down, because an employee who feels ambushed goes looking for reasons to say no. Put the offer in writing, name the deadline, and let their adviser do their job.
Section 111A of the Employment Rights Act 1996 lets an employer discuss ending employment on agreed terms without that conversation being admissible in an ordinary unfair dismissal claim. It is narrower than most people assume. It gives no protection in a discrimination, whistleblowing or automatically unfair dismissal claim, and the protection is lost where there has been improper behaviour — undue pressure, threatening dismissal if the offer is refused, or refusing a reasonable period to consider it. Plan it, put the offer in writing, and do not tell someone the alternative is being sacked on Friday.
Clear scope · fixed fees available. Buzz Legal Ltd is not a firm of solicitors and is not regulated by the SRA.