We draft the settlement agreement for your business, set out every payment and the claims it settles, and check it against the conditions that make the waiver hold. The price is fixed and agreed in writing before work starts.
A settlement agreement is a contract between you and an employee. They give up specific claims against the business, in return for an agreed package, and the employment ends on a date you both sign up to. Once it is valid, the claims it lists cannot go to an employment tribunal. It used to be called a compromise agreement.
Signed by both of you, with the employee’s adviser named in it and the claims it settles listed one by one.
Some things cannot be signed away. A clause that tries to stop the employee making a protected disclosure about wrongdoing is void (section 43J of the Employment Rights Act 1996), and accrued pension rights stay where they are. We write those carve-outs in plainly, so nobody argues about them later.
An employee cannot normally sign away their statutory employment rights. Section 203 of the Employment Rights Act 1996 makes an exception for a settlement agreement, and only if all six conditions are met. Miss one and the agreement does not stop a tribunal claim: you have paid the money and kept the risk.
The adviser is the condition that trips employers up. A relevant independent adviser is a qualified lawyer, a certified trade union official, or a certified advice centre worker. Section 203(3B) rules out anyone acting for the employer in the matter, which is why the employee has to take their own advice and why we cannot give it.
Before signature we check the final draft against all six, with the adviser’s name, firm and insurance confirmed in the agreement itself. The settlement agreement template shows the shape of the document.
Two separate rules can keep the offer and the discussion about it out of evidence. They overlap, and each has limits.
Which one applies depends on whether there is already a dispute and on the kind of claim the employee could bring. We look at both with you before the meeting, so you know what can and cannot be said.
Section 111A, Employment Rights Act 1996
Works even where there is no dispute yet, so you can raise an exit with someone who does not know there is a problem. It only covers an ordinary unfair dismissal claim. It gives no protection where the dismissal would be automatically unfair, such as whistleblowing, or in a discrimination or breach of contract claim, and it falls away if there has been improper behaviour.
A common law rule
Applies to a genuine attempt to settle a dispute that already exists, and covers any kind of claim, discrimination included. It is lost only for unambiguous impropriety, such as blackmail or perjury, which is a narrower test than improper behaviour. Our without prejudice settlement offer template shows how an offer is framed.
Examples from the Acas Code of Practice on settlement agreements. The list is not exhaustive, and a tribunal decides on the facts.
Harassment, bullying and intimidation, including offensive words or aggressive behaviour.
Victimisation, or discrimination because of a protected characteristic.
Undue pressure, such as not giving the employee a reasonable time to consider the offer.
Saying, before any disciplinary process has begun, that they will be dismissed if they turn the offer down.
You can still set out, in a neutral way, why you are proposing an agreement and what the likely alternatives are, including starting a disciplinary process where that is relevant. We help you plan what you will say before the meeting.
The offer, the payment and what you will say, agreed with us before you meet.
Acas says you should let the employee bring a colleague or a trade union representative. This is good practice. The law does not require it.
The draft agreement goes to the employee with the offer letter, ready for their adviser.
Their adviser comments on the wording. We deal with them on your behalf.
Both sides sign, the adviser signs the certificate, and payment follows on the agreed date.
The Acas Code says that, as a general rule, a minimum of ten calendar days should be allowed to consider the formal written terms and take advice, unless both sides agree otherwise. Cutting this short is one of the examples of undue pressure.
A payment made because the employment is ending falls under section 401 of the Income Tax (Earnings and Pensions) Act 2003. Section 403 makes the first £30,000 of it free of income tax, with only the excess counted as employment income.
That threshold does not reach anything the employee is already entitled to. Section 401(3) takes out payments taxed under other rules, so contractual pay, accrued holiday and bonus are taxed as earnings in the usual way. The post-employment notice pay rules, added in 2017, bring the pay for any notice period not worked into tax as well, whether or not the contract has a pay in lieu clause.
Your accountant decides the tax split. We give no tax advice. We draft the agreement so that each element is listed separately with its own amount, and the treatment your accountant settles on goes into the agreement before anyone signs.
We take your instructions, draft the agreement and the offer letter, explain what each clause does for the business, and deal with the employee’s adviser on the wording. Our duty runs to you alone.
The employee chooses their own relevant independent adviser, who explains the terms and signs the certificate. We cannot advise the employee, help them choose, or speak for them.
Employers usually contribute to the cost of the employee’s advice. The law does not require it, but Acas guidance says the employer should consider offering to pay, and without advice the waiver does not bite. We write the contribution in as a set figure, paid to the adviser against their invoice, so it does not become one more thing to negotiate.
Settlement work is quoted per matter, because a single straightforward exit and a senior departure with share options and restrictive covenants are different jobs. You tell us the role, the length of service and how far the conversation has got. We send back a written scope and a fixed price. Nothing starts, and nothing is chargeable, until you approve it. Subscribers get 10% off.
Drafted around your facts, with the claims, payments and carve-outs set out.
Headed without prejudice and subject to contract, ready to hand over.
Their comments answered on your behalf, within the agreed scope.
The six conditions confirmed before anyone signs.
If the adviser’s negotiation goes beyond the agreed scope, you are told the extra cost before any more work is done.
If the employee has started Acas early conciliation or issued a tribunal claim, the matter is contentious and no longer fixed-fee drafting work. It goes to AD Solicitors (SRA no. 8011228), and you are told that before you have spent anything. See employment tribunal defence.
The Employment Rights Act 1996 extends to England, Wales and Scotland, so the same six conditions apply in Scotland, where a Scottish advocate or solicitor can be the adviser. It does not extend to Northern Ireland, which has its own employment legislation. Tell us where the employee works when you first get in touch.
Our article on settlement agreements for employers works through an example package. Buzz Legal prepares documents and explains them. Court work and other reserved activities are carried out by AD Solicitors, authorised and regulated by the Solicitors Regulation Authority. How this works.
A fixed price, agreed in writing before work starts, set against a written scope for your matter. Subscribers get 10% off. For comparison, solicitor time for this work is commonly quoted at £200 to £350 +VAT an hour, with the total known only once the work is done. You also need to budget for the package itself and for any contribution towards the employee’s own advice.
The employee needs their own relevant independent adviser. Section 203(3B) of the Employment Rights Act 1996 rules out anyone acting for the employer in the matter, so an agreement where we advised both sides would fail the conditions. We act for the business only, and deal with the employee’s adviser on the wording.
The law does not require it. Acas guidance says the employer should consider offering to pay the cost of the independent advice, and employers usually contribute, because the agreement does not waive the claims until the employee has had that advice. We write the contribution in as a set figure paid to the adviser against their invoice.
The Acas Code of Practice on settlement agreements says that, as a general rule, a minimum of ten calendar days should be allowed to consider the formal written terms and take advice, unless both sides agree otherwise. Giving less is one of the Code’s examples of undue pressure, which can cost you the protection of section 111A.
Only the part that is compensation for the employment ending. Section 403 of the Income Tax (Earnings and Pensions) Act 2003 sets the £30,000 threshold, but contractual pay, accrued holiday, bonus and pay for unworked notice are taxed as earnings and sit outside it. Your accountant decides the split. We make sure each element is listed separately in the agreement.
Then the matter is contentious and goes to AD Solicitors (SRA no. 8011228), who can defend the claim and negotiate a settlement within it. You are told that at the outset, before anything is chargeable. See employment tribunal defence.
The job, the length of service and how far the conversation has got. You get back a written scope and a fixed price before anything is chargeable. See the privacy policy for how we use your details.
Drafted for the business, checked against the six statutory conditions, at a fixed price agreed in writing before work starts.
