Settlement Agreements for Employees: What You Need to Know

At times, the legal world can seem daunting. There are many things to keep in mind, especially when the terms “settlement” and “litigation” are used. As an employee, a settlement agreement is also known as a compromise agreement. It is reached between a business and an employee. The employee agrees to settle, or resolve the issue, and the business offers payment, and on occasion, other benefits to end the dispute. As an employee who may encounter a settlement agreement at some point in your working career, here are some things you need to know about them.

Legally Binding

A settlement agreement is not just a piece of paper; it is a legal document that is signed by both you, a representative of your place of employment, and a solicitor. If the terms that are agreed upon in the agreement are not being met by either party, the others can enforce it. Sometimes, a settlement agreement is a way for an employee and the company to part ways in a clean break. Other times, a settlement agreement is a way to negotiate differences of opinion that you may have with your employer.

Must Be Written

In this legally binding document, everything must be written down. All the details of the agreement, any clauses or references must be included in the document. If things are not included in the written document itself, it is not part of the settlement agreement. Many companies have their own, unique, templates for the settlement agreements that they have. In these cases, it is more difficult to forget to include a portion of the settlement, both for the employee and the employer.

Right to Negotiate

Settlement agreements can seem intimidating, but it is important to remember that you have the right to negotiate your settlement agreement. Often, negotiating virtually can be very helpful, allowing you to spell out what you need, but there are also specialists trained to help you. Settlement agreement solicitors can help you identify the things that you want to negotiate your settlement agreement, and then assist you in working toward those goals. Some organisations require their employees to seek counsel from a solicitor when a settlement agreement is being drafted.


A settlement agreement and any negotiations that occur are confidential. You cannot discuss the situation with anyone other than your legal counsel and your employer. Additionally, neither of you can use the same information in the event of an Employment Tribunal. If the agreement is signed, and ‘without prejudice’ is marked, the information cannot be used again. This protects you because your employer cannot use this event against you in the future, and it protects them for the same reason.  Typically, there is a clause in the settlement agreement that lays out the terms of the confidentiality arrangement.

Settlement Agreements can be used for a variety of instances, whether payroll, holiday, or termination. In each case, it is important to remember that you, as the employee, have rights and are not under any obligations to sign it. You have the right to examine it, to negotiate, and to call a solicitor to get their opinion.