EMPLOYMENT SETTLEMENT AGREEMENTS

LILLYWHITE WILLIAMS & CO SOLICITORS

EMPLOYMENT SETTLEMENT AGREEMENTS FOR EMPLOYEES

A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding agreement made between you and your employer, which will usually provide for a severance payment by the employer in exchange for your agreement that you will not pursue any claim arising from your employment against your employer.

Settlement Agreements are often used in situations where an employer and an employee have had a disagreement that does not appear capable of being resolved and to give both parties a “clean break” in terminating the employment relationship. They can avoid the need for a long drawn up disciplinary or redundancy process to be engaged, or can settle any claim that you may be seeking to pursue against your employer.

Settlement Agreements are widely used by many employers as a standard approach to avoiding or settlement work placed disputes.

Legal requirements for a Settlement Agreement to be valid:

      1. The Agreement must be in writing

      2. The Agreement must relate to a particular complaint or

         particular proceedings

      3. The Employee must have received independent legal advice

         from a relevant advisor on the terms and implications of

         the proposed Agreement and their ability to pursue any

         claim before an Employment Tribunal

      4. The identification of the advisor must be detailed in the

         Agreement

      5. The independent advisor must have a current contract of

         insurance or professional indemnity insurance (which

         covers the risk of a claim against them by you in respect

         of the advice)

      6. The Agreement must state that the conditions regulating

         settlement agreements under the relevant statutory

         provisions have been satisfied.

Is tax payable on the amount received by an Employee?

      1. If the payment to be made, or a specific part of

         it, identified in the Agreement as a “termination

         payment” then income tax is not payable for amounts up to

         £30,000 

      2. If the payment, or part of the payment, is in compliance

         with the terms of the employee’s contract of employment

         (eg. Wages or holiday pay) then the normal tax rules apply

Our fees

As a normal part of a Settlement Agreement, the employer agrees to pay or make a maximum contribution, to the employee’s legal fees. Unless there are exceptional circumstances, we would always accept this contribution without requiring our client to pay any more fees. If, however, the client changes his mind about accepting the terms of the Settlement Agreement after having advice from us, we would normally charge the client £250 plus VAT for that meeting.

The work we undertake

All work is carried out by our Principal Solicitor Andrew Williams who has over 30 years’ experience. He will have a meeting with the client in order to go through the Settlement Agreement, advise on the terms and the effect it has on the client’s rights to bring a claim against the employers in the future. The client would then sign the Agreement at that meeting. Mr Williams would explain the terms of the “Advisors Certificate” he is signing and send the completed document to the employers on behalf of the client. They will then sign their part of the Agreement and provide the client with a final completed copy.

Once Mr Williams has received the Settlement Agreement, a meeting with him will be arranged within 1 to 2 weeks. Normally the whole process is then completed within a further 1 to 2 weeks.