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  • If you have been presented with a settlement agreement you might be wondering what your options are.

    Our solicitors will work on your behalf to provide comprehensive advice to ensure you receive what you are entitled to.

    Settlement agreements are voluntary and you do not have to agree to the terms,  but determining the amount you are entitled to and whether the agreement you have been presented with is fair can be difficult.

    It is important to understand the options available to you.

    Our solicitors can offer comprehensive advice to help you decide what to do next and ensure you receive what you are entitled to.

    Understanding settlement agreements

    What is a settlement agreement?

    A settlement agreement (formerly known as a compromise agreement) is a formal written contract between an employer and an employee. It is legally binding and can be used to resolve a dispute or end employment. A settlement agreement is voluntary and stops an employee from bringing claims against an employer to an employment tribunal or court. The employee (or former employee) usually receives some form of financial payment and will also often receive a reference as part of the agreed terms.

    The terms within a settlement agreement are mutually agreed and parties do not have to accept the terms initially offered. An agreement is often reached through a process of discussion and negotiation.

    When is a settlement agreement used?

    Settlement agreements are often used in situations where an employer and employee feel that their employment relationship is no longer working and a ‘clean break’ is the best way forward or can also be used to settle a workplace dispute.

    Do I need legal advice on a settlement agreement?

    For a settlement agreement to be valid, you must have taken independent legal advice. If you sign a settlement agreement without getting independent legal advice first, you will still be able to go to an employment tribunal, and so most employers will pay a contribution or all of your legal costs. A legal adviser can also ensure you know how much you are entitled to and make sure you are getting a fair deal.

    How do I know if my settlement agreement is fair?

    What is usually included in a settlement agreement?

    Each settlement agreement differs from case to case, but, as a generalisation, settlement agreements may contain:

    • Payment of notice.
    • Any holiday pay that you are entitled to.
    • Contractual benefits including bonuses, shares, healthcare etc.
    • Compensation or ex-gratia payments.
    • Non-disclosure agreement.
    • Promises from you to your employer e.g., returning property and confidentiality.
    • Handover process details.
    • A reference and reason for dismissal.
       
    How much should I expect to receive in my settlement agreement?

    Knowing whether what you have been offered is a good amount or not can be difficult and stressful. 

    Your solicitor can offer advice to determine whether they believe your settlement agreement is fair. They will also be able to advise whether you may be able to claim more by negotiating or if you took your case to an Employment Tribunal or Court, and if any other factors are relevant or should be considered.

    How much you are offered within a settlement agreement will depend upon the surrounding circumstances, the terms in your employment contract, and any potential claims that you might be entitled to make.

    Your solicitor will be able to offer advice to indicate whether you would have a strong claim if you were to take your case to an Employment Tribunal or a Court. They will calculate how much you might receive if you were to pursue a claim in a Tribunal compared to the settlement agreement amounts you have been presented with.

    Do I have to accept?

    Quite simply, no, you don’t. However, there are some key things to consider when making this decision; whether you have a claim at all and its strength, finding another job, and the costs and risks of litigation.

    What happens once I accept or reject my settlement agreement?

    If you are happy with the amount being offered and you decide to accept the agreement, your solicitor can simply check over and sign off the settlement agreement, getting you your agreed amount quickly.

    Alternatively, if you feel the terms or amount offered is unfair or insufficient, or you aren’t sure what you are entitled to, our solicitors will assess the agreement and can offer help and advice to negotiate better terms.

    Usually, you can expect the amount agreed by all parties within 7-21 days of signing the agreement, but certain payments such as outstanding salary, etc. are likely to be paid through the payroll on the normal payroll date.

    What are my options?

    I am happy with the terms of my settlement agreement

    It may be the case that you are happy with the offer you have received and therefore there is nothing to stop you from simply signing, however getting advice from a legal professional is always advised to ensure you are getting the best deal possible.

     In many cases receiving advice for a settlement agreement will be free. Your employer will usually pay for you to receive independent legal advice. This is because if you sign a settlement agreement without receiving independent legal advice first, you may still be able to go to an employment tribunal.

    I don’t think my agreement is fair

    Alternatively, you may feel unhappy with the settlement agreement you have been presented with. In this case, you can enter negotiations or simply reject it completely. It is always important to understand everything in the agreement before signing so that you can ensure both you and your employer comply with the terms to avoid any future disputes. a solicitor can help you decide whether you are happy with the terms of the settlement agreement and discuss your options.

    Read more about deciding if your settlement agreement is fair.

    Our solicitors offer fast, same-day advice to assess your settlement agreement to ensure it is fair.

    What are your options when presented with a settlement agreement?

    Accept

    There are advantages to simply accepting what you are offered which are dependent on your specific situation. 

    You may feel as though you just want closure from the situation without the hassle of legal negotiations, although we strongly advise you to seek legal advice first to make sure that your agreement is fair.

    Negotiate

    The terms of the settlement must be agreed by both yourself and your employer. Your solicitor can advise what is reasonable in your case and help you to form a negotiation strategy. Negotiations are usually carried out via what is known as protected conversation, and it’s important to state that you are negotiating without prejudice.

    What to consider when deciding whether to negotiate

    • Have you worked for your employer for 2 or more years? If not, you cannot bring an Unfair Dismissal claim against them as stated in the Employment Rights Act of 1996. However, you may be able to claim on account of discrimination or whistleblowing providing you have evidence to support your statement.
    • How strong is your potential claim?
    • How long will it take you to find another job? This can affect the compensation pay you are given regarding loss of work hours.
    Reject

    You are not obligated to accept a settlement agreement, but this does not prevent your employer from dismissing you regardless. 

    If you do turn it down, there may be the option to make a claim against your employer however this is not guaranteed to get you as much money as you may have been offered originally. 

    Therefore, it is recommended to seek legal advice as soon as you are presented with a settlement agreement.

    Things to consider when deciding whether to accept, negotiate or reject a settlement agreement:

    Accept:

    Quick outcome

    Negotiate:

    Might get a better deal

    Reject:

    Risk of getting less than originally offered

    Accept:

    Closure

    Negotiate:

    Longer process

    Reject:

    Uncertainty

    Accept:

    Might not be the best deal for you

    Negotiate:

    Legal costs paid by employer

    Accept:

    Low stress

    Negotiate:

    Matters of discrimination compensated

    Reject:

    May still get dismissed from work

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