Understanding Settlement Agreements

Apr 09, 2025

What you Need to Know

A Settlement Agreement is a legally binding contract between an employee and an employer. These agreements can be offered to employees for many different reasons such as during redundancy, resignation or even after a workplace dispute.

Whilst they can offer a way to avoid lengthy legal battles, it is vital to fully understand the terms before signing the agreement.

Here at Garratts Solicitors, we specialise in offering expert advice on Settlement Agreements. Our team works closely with clients to review the document and if necessary negotiate its terms with their employers to ensure they are fair and in their best interests.

This article will walk you through the key points you need to know about Settlement Agreements and how we can help ensure your rights are protected.

What is a Settlement Agreement?

Settlement Agreements are a formal arrangement between an employee and employer which can resolve any disputes or clarify terms under which your employment ends.

This agreement is designed to protect both the employee and employer by providing a clear resolution.

When signing a Settlement Agreement you waive your rights to make a claim against your employer such as claims for unfair dismissal, discrimination, breach of employment contract and many more. This is why it is crucial that you seek legal advice. Whilst this document does restrict most claims against your employer, certain claims regarding personal injury may still be pursued, claims regarding your pension rights and of course if your employer were to breach the Settlement Agreement then you would be able to pursue a breach of contract claim.

More often than not a Settlement Agreement is a confidential document and there is usually a clause which refers to this. This commonly prevents you from discussing the terms of the Agreement with anyone save for your Solicitor, HMRC and immediate family this is, however, dependent entirely on how the clause is phrased. This is something our expert team will be able to clarify during an appointment.

Why are Settlement Agreements Important?

Settlement Agreements are significant for both an employee and employer, this is because they provide a structured way to resolve disputes and terminate employment relationships whilst avoiding a lengthy and costly legal process. Here are some reasons why they are important.

Legal Closure – they provide a clear and amicable resolution to an employment dispute such as redundancy, workplace grievance or termination. It allows you to move on with financial compensation and security.
Quick and Cost Effective Resolution – litigation can be a time consuming and expensive process with no guarantee for success. A Settlement Agreement can provide a quick turnaround, a more predictable outcome and ensures compensation without the stress of prolonged legal proceedings.
Financial Compensation and Security – Settlement Agreements often include financial compensation (dependent on the circumstances) such as redundancy pay or severance pay which can provide you with financial support during your transition to a new job.
Clarity – Settlement Agreements clarify the terms of your departure and ensure that you are aware of your entitlement and any ongoing obligations.
Maintaining Confidentiality – as previously mentioned most settlement agreements include confidentiality clauses which maintains privacy which can help preserve your professional reputation in certain circumstances.

How Can We Help You?

Here at Garratts Solicitors our team would be able to meet with you to provide advice on the Settlement Agreement which has been offered to you by your Employer. We have six offices in the Greater Manchester area including: Oldham, Ashton, Stalybridge, Newton Heath, Radcliffe and Worsley and we will be able to travel to any office to meet with you.

During an appointment a member of our team will discuss the Settlement Agreement clause by clause, advise on what this means for you and whether any amendments need to be made.

After the appointment you will receive a letter of advice which will outline everything that was discussed during the meeting including the advice given. This is for you to keep and refer back to should you need to.

We will then, if required, write to your employer with the amendments suggested during the appointment and ask that they provide an amended Agreement for consideration.

Once you are happy with the Agreement we will then arrange to finalise same by sending a signed version to your employer and requesting that they provide us with a counter signed copy (if not already signed).

Legal Fees

Our legal fees are most commonly paid to us directly from your employer and this is usually outlined within the Agreement itself along with how much they are willing to pay. We do have minimum fees but these can be discussed with you during the initial call.

In summary, a Settlement Agreement is a very important document which helps bring your employment to an end in the most cost effective and amicable way. Seeking legal advice is vital to ensure that the document is drafted in your best interests and that you understand any obligations you may have once it is signed.

A well drafted Settlement Agreement can bring closure to a dispute allowing both parties to move forward to your next chapter with peace of mind and certainty.