Monday, 26 October 2015

Settlement Agreement - The Right Compensation?

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I get a lot of calls from clients who have been offered a Settlement Agreement (previously known as a Compromise Agreement). A Settlement Agreement is a contract between an employer and an employee. It usually sets out terms for the employee to give up their job and any Employment Tribunal claims they may have. In exchange, the employer usually makes a compensatory payment.

As you would expect, much of my advice and much of the conversation about a Settlement Agreement centers on the compensation payment being offered. It is, of course, entirely my client’s decision whether he or she accepts such a payment and signs the Settlement Agreement. There are many reasons why an employee may be seeking a Settlement Agreement and why they might want to leave their employer. However, it is my job to ensure they have all the information they need.

When considering the compensation payment, the first part of the process is to identify what payments my client would be entitled to in any event. I look at notice, holiday, bonuses, long service awards, car allowance, redundancy payments etc. Obviously each client’s circumstances are unique. However, if my client is entitled to receive the payments being offered through their normal statutory or contractual rights, there is no need for them to sign the Settlement Agreement and subject themselves to all sorts of waivers and obligations. After all, they are simply receiving payments they are already entitled to.

The next stage is to play “what if?” I ask the question, “what if you don’t sign?” Again, each client’s circumstances are unique and if the compensation offered is generous, playing “what if?” helps my client determine whether they have a good deal. However, sometimes “what if?” demonstrates that my client has undersold themselves and they will lose out financially by signing the Settlement Agreement.

I fully appreciate that signing a Settlement Agreement will always be a personal decision for my clients. However, anyone considering a Settlement Agreement should ensure they have as much information as possible to help them make that decision. After all, playing “what if?” after you sign is simply too late.

If you have been offered a Settlement Agreement and are looking for the right solicitor to help you, give me a call on 01522 539501 for a free, no obligation consultation or visit our website at

Sally Hubbard
Employment Law Solicitor
LincsLaw Solicitors, Lincoln

Sally Hubbard

Sally is a Lincolnshire girl through and through and has lived in Lincoln her whole life (apart from a brief spell when she went to university in Nottingham, but we don’t talk about that). She began her career with Lincolnshire County Council qualifying as a solicitor in 1996, which she believes now makes her "vintage".

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