Solicitors are frequently contacted by employees facing redundancy, workplace disputes, or sudden exits. If you’ve been handed a settlement agreement—or suspect one might be on its way—you might feel overwhelmed, confused, or even pressured to sign.
But with the right knowledge and tools, you can approach the process with clarity and confidence. To explore your legal options, find guidance from solicitors in Guildford, Winchester, or wherever you may live.
In this guide, we’ll break down what a settlement agreement really involves, what your rights are, and how to negotiate for a fair outcome that protects your interests.
Photo by Pixabay: https://www.pexels.com/photo/person-signing-in-documentation-paper-48148/What Is a Settlement Agreement?
A settlement agreement is a legally binding contract between you and your employer. It typically includes terms under which your employment will end and outlines compensation, reference wording, and post-employment restrictions. In exchange, you agree not to bring any future legal claims against the employer.
These agreements are often used in redundancy situations, following internal disputes, or as a means of avoiding an employment tribunal. You must receive independent legal advice for the agreement to be valid, and your employer usually covers this cost.
The ACAS guide to settlement agreements is an excellent place to familiarise yourself with the basics.
Understand What You’re Entitled To
Before accepting any offer, take a step back and assess what you’re legally owed. This includes:
- Redundancy pay (statutory or enhanced).
- Outstanding wages or bonuses.
Your settlement amount should go beyond these entitlements to account for potential claims, emotional distress, and the cost of losing your job. It’s not a favour—it’s a negotiation.
Use the GOV.UK redundancy calculator to estimate the minimum you should expect if redundancy is involved.
Take Time—Don’t Rush
You are under no obligation to sign a settlement agreement immediately. In fact, pressuring an employee to sign quickly can amount to improper conduct. Take time to read the document, ask questions, and seek advice.
Typically, employers give 10 days or more to consider the offer, in line with ACAS recommendations. This is your time to consult with a solicitor, ask for changes, or explore alternatives.
If you’re feeling rushed, remember that you can contact Citizens Advice for help understanding your rights before signing.
Prepare Your Case
If you’re hoping to negotiate a better financial settlement, you’ll need to back it up with facts. Start by documenting any relevant issues, such as:
- Workplace bullying, discrimination, or harassment.
- Unfair performance reviews.
- Sudden role changes or demotions.
Having this information clearly presented helps your solicitor argue for higher compensation by highlighting the risk to the employer if you were to take legal action.
You don’t need to create a legal case file—just write down what happened, when, and who was involved.
Watch Out for Restrictive Clauses
Settlement agreements often include clauses about confidentiality, non-disparagement, and post-employment restrictions. Some of these are standard, but others may be overly broad or unfair.
Make sure you understand:
- Whether you can talk about the reason you left.
- Whether you can work for a competitor.
- Whether you’re allowed to speak to colleagues or clients.
These restrictions can impact your ability to find future work. Your solicitor should help you narrow them or remove them entirely if they’re unreasonable.
Ask for More Than Just Money
Don’t forget that your negotiation can include more than just financial compensation. You might also request:
- A positive written reference.
- A mutually agreed leaving statement.
- Continuation of health benefits for a period.
- Outplacement support or career coaching.
These extras can significantly ease your transition to a new role and protect your professional reputation.
A fair agreement is about more than a number—it’s about protecting your dignity and future.
Understand the Tax Implications
The first £30,000 of a termination payment can usually be paid tax-free, but anything above that may be taxed. Your solicitor can help structure the agreement to maximise your post-tax payout.
Make sure you understand how holiday pay, bonuses, and notice payments will be taxed, and confirm whether these are being paid in lieu or as part of your salary.
What If You Don’t Want to Sign?
You are never obligated to accept a settlement agreement. If the terms are unfair or you feel you’ve been mistreated, you can reject the offer and pursue an employment tribunal claim.
Tribunal claims can take longer and come with risks, but in some cases, they are worth pursuing—especially if the employer refuses to negotiate fairly.
Always weigh your options with professional advice. A good solicitor will help you understand the likely outcomes of both signing and declining the agreement.
Build a Support System
The stress of job loss or workplace conflict can take a serious toll on your mental health. Make sure you reach out to friends, family, or a counsellor if you’re feeling overwhelmed.
There are also specialist organisations like Workplace Mental Health that offer free resources to support your emotional wellbeing during career transitions.
No matter how things unfold, remember: your job does not define your worth, and you deserve a respectful, fair exit.
This article is for informational purposes only and does not constitute legal advice. For help negotiating a settlement agreement, always consult a qualified employment solicitor or adviser.
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