Share Article: What is a Settlement Agreement and why do I need to see a Solicitor?

The purpose of a Settlement Agreement is to record the terms of settlement between employee and employer in respect of any claims arising out of employment. The various pieces of legislation giving employment rights make any such agreement invalid except where the employee has received independent legal advice on the terms and effect of the agreement from a suitably qualified advisor (such as a Solicitor).

Settlement Agreements are usually offered to employees where there is an agreed exit from the business involving some form of compensation payment. This might be a redundancy situation or for some other reason, such as following a grievance. The employer wants the comfort of knowing that an employee who has been offered compensation to leave will not go on to sue them. The easiest way of doing this is to use a Settlement Agreement. The employer will usually pay for the employee to seek legal advice on the Settlement Agreement because the agreement will only be valid if this is done.

It is well worth taking your Settlement Agreement to a specialist Employment Solicitor who will be used to the issues involved and can ensure that you are advised properly and promptly. In our experience, many Settlement Agreements contain drafting errors that can unfairly impact the employee. The rules around what is and is not tax free are complex: the wording of the Agreement can be crucial in ensuring that employees receive tax free sums when this is the genuine and lawful intention.

We ensure that our clients are properly advised about the terms of the agreement and how that impacts the taxation of any compensation payments. We negotiate any necessary changes with the minimum of fuss to ensure that your Settlement Agreement is fit for purpose and properly protects your interests.

We are also able to draft Settlement Agreements for employers, taking account of the likely issues to be raised by Solicitors from whom the employee will be seeking advice. We ensure that our drafted Settlement Agreements properly protect the employer whilst not containing any unfair terms that would prompt requests for amendment. This way, the process of completing the Settlement Agreement proceeds as smoothly and quickly as possible.

Contact Louise Taft on 020 7935 3522 or if you have any questions about Settlement Agreements, need advice because you have been offered a Settlement Agreement or would like a Settlement Agreement drafted.
Whatever your personal circumstances the above is only a guide and we would advise you to contact us to obtain definitive advice as you will appreciate that each person’s circumstances are unique to them.

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