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What To Do If You’re Offered A Settlement Agreement.

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Settlement Agreements were previously known as Compromise Agreements.

What are they and when might you be given one? What should you do if you are unexpectedly offered one?

You may be invited for a “protected conversation” often referred to as “without prejudice” or “off the record”. That can be a nasty surprise: it’s the first indication your employment is about to end, especially if you’re told something to the effect of:

we’re offering you this agreement and if you don’t accept within the next few days we’ll end your employment anyway/after following a proper process.

If this does happen, stay calm, let the employer do the talking and make notes. Nothing you agree to during the meeting will be binding until you have taken legal advice.

“Surely, any legal advice is going to cost me?”

Not always.

At Wilson Browne, we’re used to people phoning with common questions where this has happened to them  (often before they have been issued with an actual agreement).

If this happens to you, and you just want some answers to those questions…

We offer a FREE 15 minute chat with an employment lawyer specialising in settlement agreements: no strings, no catches, no obligation.

The basics

A Settlement Agreement (formerly known as a compromise agreement) is a legally binding agreement between an employer and an employee where you (the employee) agree to settle your potential claims: in return, the employer will generally agree to pay financial compensation.

Settlement Agreements are typically associated with the ending of someone’s employment and are issued either shortly before or after the employment has ended. In some circumstances, they can be used when employment is going to continue, but let’s focus on a situation where your employment is going to end.

In brief, a Settlement Agreement says that you (the employee) agree not to pursue a potential claim against your employer or former employer, in return for compensation (money).

To be binding, the employee must get independent legal advice before signing.

Why might you be offered a settlement agreement?

COVID has seen many businesses being forced to restructure.

The retail sector has been crippled as shops are closed – unless a retailer has a significant web presence, it’s likely to have felt significant financial pain.

Just think of all the big names that have gone ‘bust’: Arcadia (Topshop, Dorothy Perkins, Burton and Miss Selfridge); Debenhams; countless others in ‘administration’ (a sort of intensive care for failing businesses); 10,000 pubs, clubs and restaurants permanently closed…the list goes on. Almost every business was affected in some way.

Restructuring inevitably means job losses. Businesses can only afford to have staff numbers relevant to the business need, and some jobs may not exist at all in their previous form.

When we talk about Settlement Agreements, it’s easy to associate it with redundancy. This is often the case but not always – it could be that:

  • the relationship between employee and employer has broken down
  • perhaps despite your best efforts, the employer feels there are issues with performance
  • maybe there is an issue with conduct and it’s in everyone’s best interests to find a solution that is as pain-free as possible, negating the need for a long, drawn-out process.

Whatever the reasons, being offered a Settlement Agreement may come as a shock, so what do you do?

More examples of when you may be offered a Settlement Agreement

  • Compulsory or voluntary redundancy (including the end of Furlough)
  • Company re-structures

  • Disputes at work
  • Variations to contracts of employment – eg place of work, hours, nature of job role

  • Grievances and disciplinary matters

  • Prolonger ill-health or ‘excessive’ absence

  • Misconduct

  • Poor performance

  • If you are a Director/Shareholder of a business – shareholder disputes (eg fitness to act as a Director or loss of support from fellow Directors/Shareholders

  • Sale or acquisition of a business – generally under TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006

Do you have to accept the Settlement Agreement?


You don’t have to accept it, but you could still be dismissed or made redundant anyway.

If you do say ‘no’ and are dismissed/made redundant anyhow, you may be able to bring a claim against the employer, but that is a long, drawn-out process and there are risk: you may not win, and you may not be awarded as much as you were offered in the initial agreement.

Common questions:

  • I haven’t dealt with a settlement agreement before, what is it?
  • I have been told I only have a few days to accept the deal. Is this right?
  • I have been offered a sum of £xxx, do you think this is reasonable?
  • Am I able to negotiate the payments with my Employer? Will this cause an issue for me?
  • Do I have to sign it?
  • What happens if I don’t sign?
  • Does agreeing to a Settlement Agreement mean I get a better deal?
  • I’m worried that my employer may go ‘bust’: should I take the agreement as at least I’ll get ‘a payout’
  • My employer has asked for people to take voluntary redundancy under the terms of a Settlement Agreement:
    • If I agree, do they have to make me redundant?
    • I think they may ‘go bust’: is it better to accept the deal i.e would I still get some compensation if the business fails?
  • What will happen during my meeting with the legal advisor?

We can answer all of these questions and more.

The good news (such as it is) is that your employer will normally pay for your settlement agreement. That doesn’t mean it’s an unlimited amount of money, but we can normally give you all the advice you need within the amount an employer pays.

You shouldn’t worry that just because the employer is paying you won’t get the best advice. Our duty is to you: we will act in your best interests (we are legally bound to) to make sure you get the best advice, you know what it all means, and you get the best possible outcome.

To find out more about settlement agreements, READ THIS

Call us today – we’re all the help you need.

Our What To Do If You’re Offered A Settlement Agreement. Experts