EMPLOYMENT LAW
What to Do If You Receive a Settlement Agreement in the UK
You've been handed an envelope by HR and given 7 days to sign. Inside is a settlement agreement — a legal document that will waive your right to claim against your employer. Here's exactly what to do, what to look for, and how to protect yourself before you sign anything.
This is one of the most stressful situations an employee can face and most people do not realise they have the right to negotiate and that they should.
A settlement agreement is only legally binding if you have received independent legal advice before signing it. Your employer is required to contribute towards the cost of that advice, usually between 250 and 500 pounds. This means you are entitled to have the agreement reviewed by a professional before you commit to anything.
The first thing to do when you receive a settlement agreement is not to panic and not to sign anything straight away. Seven days is actually a reasonable amount of time and a good employer will not withdraw the offer simply because you ask for a little more time to consider it properly.
Read the agreement carefully and make a note of everything it covers. Most settlement agreements will include a termination payment, a contribution to your legal fees, a reference clause, and a confidentiality clause. Some will include restrictive covenants that limit where you can work after leaving. Make sure you understand every clause before agreeing to anything.
Consider whether the offer is fair. To assess this properly you need to think about what claims you might have against your employer and what those claims could be worth if you pursued them. Common claims include unfair dismissal, discrimination, unpaid wages, notice pay, and unpaid holiday. A settlement agreement that does not fairly reflect the value of your potential claims is worth negotiating.
Do not assume that because your employer has made an offer you have no power in the situation. Settlement agreements are negotiations and the first offer is rarely the best one. We regularly help clients understand what they are being asked to sign, identify whether the offer is reasonable, and prepare a response where negotiation is appropriate. You have more options than you think.