Employment Settlement Agreements

Compromise Agreements, Settlement Agreements & Redundancy Agreements

Main types of Employment Termination Agreements: 

  • Compromise Agreements
  • Settlement Agreements
  • Redundancy Agreements

These three types of employment termination agreements generally aim to protect the employer from any lawsuit that an employee might want to bring against the employer.

However, a majority of departing employees sign these agreements after receiving independent legal advice.

For many clients we have served, they wish to leave the employment anyway and plan to use the best compensation payment they can obtain from the employer as funding that open up new opportunities and a brighter future.

Obinna Baranta

Obinna Baranta


Getting the best compensation and making sure that the agreement does not contain any adverse terms for the leaving employee is where our experienced solicitors come in.

Compromise agreements, also known as settlement agreements, are recognised by law and their function is to allow the employee and the employer to part ways amicably with a fair termination arrangement.

We will go through your agreement, and give you first-class advice on whether or not your agreement is fair enough for you to let go of your employee legal rights.

Your occupational pension will usually be frozen and you can draw from it when it matures.

These days many pension schemes allow for early withdrawal from the pension or a lump-sum payment in lieu of your contributions that may include some capital appreciation on your contributions.

If you have made long pension contributions, and you wish for us to look into how you can recover your investment in your employer’s pension scheme, we can contact your employers and your employers’ pension provider about your early withdrawal from the scheme.

We can also look into the option of transferring the pension to another scheme or the possibility of your continuing to pay into your existing pension via your new employer.

Your payment becomes your legal right and entitlement which should usually be within 7 or 14 days or within any alternative time frame which is in the agreement.

This time frame can also be negotiated on your behalf if you wish to receive an earlier payment for any reason.

Sometimes your company can propose that your payment comes through in the next company pay run whereas you may not wish to wait for the next general pay day as you are moving on to other matters.

For payments arising from a settlement agreement which amount to less than £30,000, you do not have to pay tax.

But you do have to pay tax on elements of your settlement which would have been normally taxable during your employment period such as, amounts paid for notice in lieu; holiday pay; bonuses; perks etc.

After the transaction, you should keep your compromise agreement safe so that if necessary you can prove to the HMRC THAT that the payment of your lump sum into your account was in relation to a compromise agreement.

Your employer will typically put an indemnity on tax into the agreement but in most cases, as long your compensation is correctly calculated and it is pure compensation money, it is not unlikely that the tax man will expect or demand any tax to be paid on compromise agreement funds.

Therefore, the indemnity to your employer is just an extra protection for the employer and under normal circumstances would not be an onerous demand on you.

Yes, this is always better.

If you can’t find it and your employer won’t offer you a new copy we can advise you without your initial contract of employment, if you give us instructions to proceed. This is not so unusual.

The benefit of us seeing your contract is that we may find some good points for you in the contract, for example, the correct notice period or any enhanced redundancy payments that were due to you.

We may also find that there are termination clauses which have not been followed in substance or post termination restrictions which are binding on your employer. This can all be used to ask for an increase in the settlement or compromise agreement figure.

After our advice, if you find the compromise/settlement or redundancy agreement acceptable and there are no amendments to be made, we will provide you a certificate of our advice in the same meeting.

Depending on how long the agreement is, this can be concluded in a meeting that lasts about thirty minutes to one-hour.

We can then send our “advisors’ certificate” on our headed paper, signed, stamped and dated to your employers.

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Your employer wants to ensure that you will not later bring a claim against their organisation at the Employment Tribunal.

By getting you to receive specialist legal advice, it will become more difficult for a court to accept that at the time you signed the document you did not have a full understanding of its legal implications.

Your employer also wants to reduce the possibility of any future claim by you that you signed the document because your employer influenced your choice to enter the agreement.

Therefore, your solicitor’s role is to make sure that you understand the document in full.

After your solicitor has giving you full advice on the agreement, he or she will request that you confirm that you have understood the contents and legal effects of the compromise or settlement agreement.

Your solicitor will then go on to provide a letter or certificate of advice to you and to your employer to confirm that appropriate advice has been given to you. This will then enable your employer to pay the agreed settlement money to you.

The advantage for you and for your employer is that your solicitor’s advice is covered by a professional insurance policy.


It is sometimes possible to negotiate and reduce the list of claims that have been excluded by your employer, even though this is not a common possibility.  What is more likely is that you can get a better deal on your future employment references, compensation and pensions.

The important benefit of getting legal advice as an employee is finding out if the amount of money you are being offered by your employer is less than what you could be entitled to receive.

Some employees find that as a result of a term in their contract their solicitor discovers that they can bring a good claim against their employer. This can encourage their employer to increase the settlement offer that was on initially on the table.

A solicitor may find also that you are entitled to certain bonuses and incentive payments, or to an accrued holiday or sick pay that has not been calculated into the total amount on offer, and this again can lead to an increase in the amount offered by your employer.

Employers typically include a very long list of types of claims that are covered by the agreement and by signing this agreement you are giving up your rights to bring any of those claims. It is better to be sure that you are doing the right thing for yourself by receiving expert advice.

An experienced solicitor will also tell you the meaning of sections of Laws, Acts and Regulations that are mentioned in the document. Matters like the tax position on the compensation is another aspect on which your solicitor will offer valuable legal advice to you.

Many employers will offer to pay for you to gain advice from an employment solicitor. Our firm will charge you the same fees that have been offered by your employer for advice on the agreement document.

Some employers will expect us to send a form directly to them, so that they will make the payment for your advice directly to our firm.

Other employers may expect you to make your payment to us of an amount up to a pre-set amount and then this amount will be added to your compensation payment so that you are fully refunded for your legal fees.

Whichever option applies you are our client even though the payment is made by your employers and we are professionally and ethically interested in your best interests, and not in your employers’ interest.

We are happy to pursue our payment directly from your employers where this has been indicated on the documents issued to you, so that is one less thing for you to worry about.

  • Full and Final Payment: The compromise agreement will state the units of payment and the total payment you are receiving and will make clear that this is your full and final payment. It should state the extent to which the sums will be paid free of tax.


  • Tax free: Usually, up to £30,000 compensation is usually paid without deduction of tax, but you may have to give a tax indemnity to your employer in the settlement agreement. This is entirely usual and your employer will insist on this unless you prefer to permit your employer to deduct tax and pay to the HMRC.


  • Confidentiality: The compromise agreement will also provide that you must not tell other people about the agreement. You will also be agreeing that you will not share employer’s trade secrets. Business affairs will also be covered such as setting up in competition or joining a competitor organisation within a certain period of time.
    Importantly the terms of the compromise agreement itself are usually confidential and cannot be disclosed to anyone. We can negotiate for you to be paid a small additional sum for agreeing to some of the confidentiality clauses. This payment is usually a few hundred pounds and may already be a component of the figure that has been offered to you.


  • Approaching your employer’s clients: Many of the restrictions including approaching clients and working for competitors may already be in your employment contract but will be reaffirmed for a period of time usually for six months after you leave. You may need to take specific advice on this if you have important clients that you brought into the business and who wish to follow you out of the business.


  • Usually, the agreement will prevent you from saying bad things about your employer: The settlement agreement will usually require that you do not make any derogatory comments against your employer after your employment terminates. You can also insist on the same from the employer and employers are often okay with making this a mutually applicable clause.

There is always a long list of statutes in the compromise agreement (such as the Race Discrimination Act, Sex Discrimination Act, Employment Rights Act) as your employer will wish to cover against everything under the sun.

By signing the agreement, you are agreeing not to bring a claim under any of these laws.

You should not be concerned by this as the purpose of the compromise agreement is full and final settlement of all claims the employer needs to list these to be able to enforce the agreement.

Moreover, certain kinds of non-statutory claims and pension claims will not usually feature on this list.

If you need even more detailed information, our experienced compromise agreement solicitors will be happy to give you further advice and assist you through the process of ending your relationship with your current employer.

Please contact Mr Obinna Baranta on 079 443 45 443 for advice and guidance on settlement agreements.

Most employers will attach your proposed reference to the compromise agreement. This is usually a basic reference.

It will state information such as when you started, your position, your days off sick and when you left.

The reason for this is to protect you and protect your employer by avoiding writing a reference for various employers which may not be consistent and in the process entering a situation where something is said which could be detrimental to you and which may expose your employers to being sued by a new employer or by you for breach of the compromise agreement.

However, the contents of your reference can be negotiated given that it is an important document that affects your future employment prospects.

We can ask for better information about you to be included e.g. your promotions, successes in projects and the bonuses you received during your service to your employer.

Impartial Advice

What you need is independent and impartial advice from a firm that is not involved with your main transaction.

The main benefit is that a solicitor who is unconnected to any other parties to your main transaction, will focus only your best interest and how the transaction affects you.

Our solicitors start by reminding you that placing your signature on any document is a choice for you.

You will then receive our legal advice and professional opinion in clear and straightforward language.

If we notice any risks in a transaction that you are not already aware of, we will bring these to your attention, and inform you of every legal option that can enable timely and successful completion of your transaction.

What is your solicitors’ role?

When your solicitor signs under a statement that you have received independent legal advice from him or her on the contents of a document, that document becomes certificate of independent legal advice.

Giving a certificate of independent legal advice is not the same as witnessing your signature on a document. Your solicitor will also consider any information he or she has received from you.

You may be about to give consent; be a surety; provide a guarantee or waive some of your legal rights. To ensure that you know the full extent of your legal position, your solicitor may also ask you some questions about the transaction.

Your solicitor does this in other to ensure that your best interests are protected and that you know the legal effect of your signature of the form or document.

Your solicitor has a legal and ethical duty to advise you and act in your best interest.

Other benefits of independent legal advice?

You will enjoy peace of mind when you receive quality legal advice on the document you are about to sign.

Our solicitors believe that important transactions should progress and complete without any avoidable delays and stress, so they will be doing their best to achieve this.

Your document may not be an agreement or a contract. It may be a form or a letter on which your signature is required.

Whichever form your documents take, we devote sufficient time to explain the contents and legal implications so that you can act with confidence.

  • Contact us on 020 3742 9153 or 079 443 45 443 to request a solicitor’s home visit or office appointment.
  • We will usually attend your address OR receive you in our office within 24 hours of your call.
  • We will deliver advice on content of your forms and the implication of placing your signing the form during our meeting with you.
  • You can help us to assist you efficiently by giving us relevant information about your transaction.
  • Please have documents that verify your identity and your address ready as we must certify that we conducted our identity checks before we advised and certified our advice to you.
  • If you decide to go ahead with signing the documents after receiving full legal advice, we can also witness your signature.
  • We will then provide our certificate of independent advice to you and additionally to any other third party you instruct us to notify.
  • Finally, we will confirm our advice to you in writing and issue our invoice for the amount of payment we received for our services to you.

  • Oaths & Certifications
    We are commissioners of oath. We have seals and stamps which will be placed on the documents under oath. We can certify any document except documents and refer you to a notary public when necessary.
  • Certified True Copies
    We can seal and certify true copies for the Foreign Office, Embassies, High Commissions and other documents.
  • Legalisation of Documents
    You can instruct us to apply on your behalf to the Foreign and Commonwealth office to Legalise Documents.
  • Certifications of Identity
    Many authorities and procedures require certifications of applicant’s identities. We can confirm and certify your identity.  This service is a same day service.
  • Witnessing Signatures
    Some documents require a witness to be a Solicitor who must be present at the time of your signature. We can check your identity and witness your signature in our office or at your residence.
  • Photo Identities
    We can certify “a true likeness” of yourself and a photo in your international passport or driving licence or any other type licence. We can also endorse photos as a true likeness of you.

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