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Settlement Agreements

Based in Lymington, Scott Bailey’s expert settlement agreement solicitors regularly support businesses and individuals across Southampton, Bournemouth, and the South. Drawing on their significant experience, our team will guide you through the process and ensure you achieve the best possible outcome.

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What is a settlement agreement?

Settlement agreements are often used by employers as a means to resolve disputes with employees that could potentially lead to an employment tribunal. In order to settle the dispute, the employer will enter into a legally binding agreement to provide the employee with a specified amount of money, cease any unlawful treatment, or both, in exchange for the employee agreeing not to pursue a claim against the company.

An employee signing a settlement agreement, with their solicitor guiding them
An employee getting independent legal advice about their settlement agreement

How much do solicitors charge for settlement agreements?

Generally speaking, when acting for the employee, the employer will specify a contribution to legal expenses within the settlement agreement. Usually, this contribution to legal costs is between £350 – £800 + VAT depending on the industry, location, position of the employee, and so on. Unless there is protracted negotiation required, generally our fees will cap at whatever the employer agrees to contribute. This basically means the cost of independent legal advice is free to the employee.

What is a reasonable settlement agreement?

Settlement agreements can be used to resolve a wide range of disputes, from unfair dismissal to discrimination or sexual harassment. As a result, determining what constitutes a reasonable settlement agreement varies depending on the merits of your case and the specific circumstances surrounding it.

Typically, for a case of unfair dismissal, compensation would be around two to three months’ gross salary. However, for more serious allegations, the compensation amount may significantly increase.

In addition to compensation for contract termination, you should also receive payment for any remaining salary, benefits, accrued or unused annual leave, and notice pay up to your termination date.

Other payments that may be included in the agreement include bonus payments, commission payments, or a contribution towards outplacement services, training costs, or relocation costs.

If your employer requires you to sign a non-disclosure agreement, which is quite common, your settlement agreement may also include a payment in exchange for your cooperation.

Are settlement agreements taxable?

In most cases, the first £30,000 of compensation or ex gratia payments resulting from a settlement agreement are tax-free. However, other payments included in the settlement agreement may be subject to tax. If you would like to find out how much you can expect to receive from your settlement agreement, get in touch with us and we would be happy to help.

Employee reviewing how much compensation they'll receive from settlement agreement after tax
Solicitor negotiating a settlement agreement

How to negotiate a settlement agreement?

When it comes to negotiating a settlement agreement, it is important to know how much your case is worth, use the process to your advantage, conduct yourself professionally, and consider any non-financial benefits you would like included in the agreement, such as a positive reference. Unless you are an expert on settlement agreements, working this all out can be challenging. Whilst you will be required to seek independent legal advice during the process, seeking legal advice as early in the process as possible will put you in the strongest position when it comes to negotiating. At Scott Bailey, our team of experienced employment solicitors are experts at navigating the settlement agreement process and can help you achieve the best possible outcome.

Can an employee request a settlement agreement?

Yes, as an employee, you can request a settlement agreement. Whilst typically it is the employer that offers a settlement agreement, if you feel your position is becoming untenable due to your employer's behaviour or your working conditions, a settlement agreement is an effective way to terminate your employment whilst ensuring you are fairly compensated. If you would like advice on requesting a settlement agreement, contact us today, and we can guide you through the process.

An employee requesting a settlement agreement from their employer

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Phone: 01590 676933

Fax: 01590 679663

Email: [email protected]

Scott Bailey LLP, 63 High Street, Lymington, Hampshire, SO41 9ZT

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