Offered a Settlement Agreement? Know Your Rights Before You Sign 🤝

If you’ve been offered a settlement agreement by your employer, it’s essential to understand your rights and entitlements before signing anything. At KLG Law, our expert settlement agreement solicitors answer the most frequently asked questions to help you make informed decisions and secure the best outcome for your future.

📄 What Is Included in a Settlement Agreement?

A settlement agreement (previously known as a compromise agreement) is a legally binding contract between an employer and employee. It’s used to resolve disputes and end employment on mutually agreed terms. Here’s what it typically includes:

🧾 Reference

Employers are not legally required to provide a reference, but this can be negotiated as part of the agreement. It may be a factual reference or a more detailed one highlighting your achievements. Some companies only offer factual references due to internal policies.

💷 Ex Gratia / Termination Payment

This is often a lump sum paid as compensation. Amounts up to £30,000 can be tax-free, depending on how the agreement is worded. It’s crucial to review the tax implications carefully with legal guidance.

📆 Notice Pay

Based on your contractual or statutory notice period, this may be paid in lieu (PILON). Notice pay is taxable and subject to national insurance contributions.

🌴 Accrued Holiday Leave

Any unused holiday is usually included in your final pay. It’s calculated to the nearest full or half day and is taxable, as it’s treated as normal earnings.

🌳 Garden Leave

You may be placed on garden leave during your notice period while remaining an employee. This often involves a waiver of employment-related claims, requiring independent legal advice.

🚫 Post-Termination Restrictions

Your agreement may include clauses such as non-compete, non-solicitation, or confidentiality restrictions. These must be reasonable to be enforceable. We can help negotiate waivers or compensation for such restrictions.

🏥 Employee Benefits

Some benefits, like private healthcare or a company car, may be extended for a limited period after leaving. These are often negotiable depending on your role and terms.

💰 Bonuses

Whether you’re entitled to a bonus depends on whether it’s contractual or discretionary. We assess the agreement to determine if a refusal to pay is legally valid.

📈 Share Options

Your entitlement depends on your scheme and whether you’re a “good leaver” or “bad leaver.” We’ll review your share plan rules and support your negotiations.

🖥️ Company Property

You’ll be expected to return all company property, such as laptops, phones, or vehicles. Agreements may also require proof of data deletion or asset return.

🤐 Confidentiality Clause

Most agreements include confidentiality clauses, generally favouring the employer. However, exceptions typically apply for legal advisors, spouses, or future employers. We can negotiate mutual clauses for your protection.

📝 Reason for Leaving

Your employer usually drafts this section, but it can be negotiated. We’ll help ensure the wording is fair—such as citing redundancy or mutual agreement. This section is often confidential and won’t impact future employment.

👨‍⚖️ Why Get Independent Legal Advice?

By law, you must obtain independent legal advice for a settlement agreement to be valid. At KLG Law, we:

• Offer same-day reviews of settlement agreements

• Provide full virtual consultations via phone, Zoom, or Teams

• Negotiate improved compensation packages where appropriate

• Ensure your employer covers our legal fees in most cases

💬 Speak to KLG Law – Expert Settlement Agreement Solicitors

If you’ve been offered a settlement agreement or are facing employment termination, contact our experienced employment lawyers. We’ll provide clear, practical advice and help you secure the best possible result.

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