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Settlement Agreements

A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding contract between employer and employee which settles claims that the employee may have against their employer.

The terms of the Settlement Agreement will be mutually agreed between the employer and employee. Those terms will then be set out in the written settlement agreement document, which will identify the claims which the employee agrees not to pursue in exchange for the agreed payment. Any Settlement Agreement should be customised for the specific employee and their individual circumstances.

Therefore, it is advisable to seek expert legal advice first.

Our guide to Settlement Agreements includes the following information:

  • Requirements for a Settlement Agreement to be valid;
  • Standard clauses in a Settlement Agreement;
  • Exclusion of claims;
  • Termination payment;
  • Tax Indemnity;
  • References;
  • Bonus payments/holiday entitlement;
  • Medical and life insurance;
  • Legal advice regarding the Settlement Agreement;
  • Breach of a Settlement Agreement.

Settlement Agreements are a very useful way of ensuring that employer/employee disputes (or possible disputes) are concluded without the need for either side to resort to legal action. However, the law relating to them can be complex and it’s always a good idea to take expert legal advice before you begin to go along the Settlement Agreement route.

For expert advice in connection with the matter, please contact our employment law department on 02476 229 582 or email


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