Settlement Agreement template UK

A Settlement Agreement is a legal document entered into by an employer and an employee to resolve a workplace issue or bring employment to an end on mutually agreed terms.

In most cases,** the employee receives a compensation payment** in exchange for waiving their right to bring specific employment claims before an employment tribunal.

Depending on your situation, you may need to create one type of agreement or another to make sure the terms cover the context of your case.

Below are some of the most common types of Settlement Agreements:

Termination Settlement Agreements

This document is used when employment is ended by mutual agreement. These typically outline notice arrangements, compensation, accrued holiday pay, tax treatment, return of company property, and confidentiality obligations.

Redundancy Settlement Agreements

Redundancy Agreements are offered when a role is at risk of redundancy. They often include an enhanced redundancy payment, notice terms, and agreements relating to references and the redundancy process.

Grievance or dispute Settlement Agreements

Suppose you are having a dispute with an employee. In that case, you can use this to resolve ongoing workplace disputes related to discrimination, harassment, or disagreements over terms in the employment contract, without ending the working relationship.

These agreements clarify the agreed actions, confirm that the matter is fully resolved, and include terms for compensation, if applicable.

Post-termination dispute Settlement Agreements

If you are working on a settlement after terminating the contract, you can use a post-termination Settlement Agreement.

For example, if an employee raises potential legal claims, this agreement settles the dispute and secures a definitive termination.

Protected conversation Settlement Agreements

Creating these agreements usually results from confidential discussions that are meant to explore settlement terms. They are formalised in a written confidentiality Settlement Agreement that protects both parties.

Reviewing a sample is a helpful way to understand the key clauses and terms needed in a Settlement Agreement in the United Kingdom.

With a well-written Settlement Agreement that is compliant with United Kingdom employment laws, you can avoid further disputes and issues in the future.

Use our Settlement Agreement template, and follow the steps below:

1. Set out the parties and background: Identify each party in the agreement, and briefly describe the reason for the settlement.
2. Explain the termination terms: Confirm the final working day, notice arrangements (worked or paid in lieu), and any outstanding pay or benefits due, including holiday entitlement.
3. Detail the settlement payment: Specify the compensation amount and how and when it will be taxed. Clarify which sums are contractual and which may fall under the £30,000 tax exemption.
4. List the claims being waived: Clearly outline the employment tribunal claims the employee agrees not to pursue. This section must be precise to make sure the waiver is legally enforceable.
5. Add confidentiality and obligations: Include confidentiality terms, non-disparagement wording, and details about returning company property. Attach an agreed reference if applicable.
6. Include the legal advice: Confirm the employee has received independent legal advice and attach the adviser’s certificate.
7. Sign the document: Make sure both parties sign and date the agreement, noting the governing law.

You can use our e-sign tool to sign the document with the other party without needing to meet in person.