Independent Legal Advice for Settlement Agreements – Employee-Focused, Employer-Funded

1. What Is a Settlement Agreement?

A settlement agreement (previously known as a "compromise agreement") is a legally binding contract between you and your employer. It sets out the terms of your departure from the company, often resolving disputes or agreeing on exit arrangements. In exchange for a financial settlement or other benefits, you agree not to bring any further legal claims against your employer.

Settlement agreements offer a structured and amicable way to finalise your employment, protecting both parties. If you'd like our expert solicitors to perform a "no commitment" review of your settlement agreement, click here to get started.

2. How Much Money Can I Get in a Settlement Agreement?

Financial settlements typically range between two and six months of gross salary, in addition to notice pay, holiday pay, and other contractual benefits. However, the amount you can expect depends on factors like your industry, job role, seniority, and the circumstances of your departure.

For example, if there’s evidence of unfair discrimination or whistleblowing, your settlement figure could be higher, as these cases often result in greater compensation in the Employment Tribunal. Employers may also offer more to avoid the costs, time, and reputational risks of going to the ET.

Each case is unique, so seeking expert legal advice is essential to understanding what’s achievable and ensuring you make an informed choice about accepting the terms on offer.

3. What Else Should I Look for in a Settlement Agreement?

A settlement agreement isn’t just about the money—there are other important factors to consider, such as:

A Positive Reference: Your employer might agree to provide a written reference or confirm a standard response for verbal references, helping with future job applications.

Legal Fees Contribution: Most agreements include a payment from your employer to cover the cost of your independent legal advice.

Confidentiality: Clauses to keep the agreement private, safeguarding your reputation and theirs.

Non-Disparagement: A mutual agreement that neither party will speak negatively about the other.

Extended Benefits: Such as private health insurance or perks for a set period.

Career Support: Some employers offer outplacement services or career coaching to help with your next steps.

These extras can often be included in your agreement, so it’s important to think about what matters most to you. Expert legal advice will help you understand these options and ensure the agreement aligns with your priorities.

4. Will I Have to Pay Tax on the Settlement Payment?

In most cases, the first £30,000 of a settlement payment is tax-free. However, any payments related to salary, holiday pay, bonuses, or benefits in kind are taxable as normal.

As part of our service, we’ll clearly explain the tax implications of your specific agreement, so you know how your settlement payment will be treated. This ensures there are no surprises once you sign.

5. Should I Sign the Settlement Agreement or Take My Case to a Tribunal?

Settling is often quicker and less stressful. It provides certainty—a guaranteed outcome—without the unpredictability of a tribunal, where even strong cases can result in no award. Settling also keeps the process private and avoids the time and costs of the Employment Tribunal, which can drag on for months or years.

Another advantage of settling is the chance to negotiate a positive reference, even if maintaining the relationship with your employer isn’t possible. ETs, on the other hand, are public and can be emotionally taxing.

That said, if your case involves serious issues like discrimination or whistleblowing, a successful claim could result in a higher payout and hold your employer accountable.

Ultimately, the choice comes down to your priorities—whether you value certainty, privacy, and speed, or are willing to take on risks for potentially greater rewards. We’re here to help you weigh your options and make the decision that’s right for you.

6. Why Do I Need Independent Legal Advice?

Let’s reframe the question: It’s not just “Why do I need independent legal advice?”—the employer won’t sign the agreement without it. Under Section 203 of the Employment Rights Act 1996, independent legal advice is a legal requirement for the agreement to be binding. Without it, the settlement agreement isn’t enforceable.

The real question is: Why do I need good independent legal advice? This isn’t just about ticking a box for the employer—it’s your chance to fully understand what you’re signing and ensure it works for you.

At Settlement Advice 4U, we provide clear, practical guidance on how your settlement agreement affects your unique circumstances. Good advice doesn’t just fulfil a legal obligation—it empowers you to take control, move forward with confidence, and make informed decisions. With us, your voice is heard, and your interests are protected.

7. Who Pays for Legal Advice on a Settlement Agreement?

In most cases, your employer will cover the cost of your legal advice when offering a settlement agreement. This is standard practice in the UK because, for the agreement to be legally binding, you must receive advice from a qualified solicitor. The employer’s contribution towards your legal fees is typically included in the agreement itself.

At Settlement Advice 4U, we ensure our fees are fully covered by your employer’s contribution, so there’s no cost to you.

8. What Does the Independent Legal Advice Cover?

We’ll explain the key terms of your settlement agreement, including what you’re agreeing to, the rights you’re waiving, and any legal or financial implications. Our aim is to ensure you clearly understand the agreement and feel confident making informed decisions about your next steps.

9. Can I Negotiate the Terms of a Settlement Agreement?

Yes, you can negotiate the terms of a settlement agreement if you’re not happy with what’s been offered. Our role is to help you fully understand the terms and highlight any key areas you may want to revisit, so you can decide whether to proceed or seek adjustments.

Our focus is on giving you clear, practical advice to help you make informed decisions, ensuring the agreement works for your needs.

10. How Long Does the Independent Legal Advice Process Take?

Our process is quick and straightforward. Once you upload your settlement agreement through our website, we aim to respond the same day and typically finalise our advice, including certification, within 24 to 48 hours of receiving your draft.

If you’re working to a tight deadline, let us know when you submit your draft using the “Request a Review” form, and we’ll do our best to accommodate your timeframe.

11. Is the Information I Provide Confidential?

Yes, absolutely. We take your privacy very seriously. Any information you share with us is treated as strictly confidential. Our service complies fully with data protection regulations, ensuring your personal and legal details are always kept safe and secure.

For more details, you can review our Data Protection Policy.

12. Can I Talk About My Settlement Agreement?

Most settlement agreements include a confidentiality clause, which limits who you can discuss the terms with. Breaching this clause could have serious consequences, like being required to repay some or all of your compensation.

There may be circumstances where disclosure is necessary, such as reporting unlawful conduct. Confidentiality clauses should not unfairly restrict you from making essential disclosures in these situations.

We’ll guide you through these terms to ensure your rights are protected, giving you clarity and confidence that the agreement works in your best interests.

13. What Happens If I Don’t Sign the Settlement Agreement?

Settlement agreements are voluntary. If you choose not to sign, there’s no agreement, and you retain the right to pursue any potential claims against your employer. However, your employer may take other steps, such as disciplinary action or redundancy procedures, to end your employment.

We’ll help you understand the implications of not signing, ensuring you’re fully informed about your options before deciding your next move.

14. If I Don’t Sign, Does Settlement Advice 4U Get Paid?

Our fee is covered by the “employer’s contribution” included in your settlement agreement. If there’s no agreement, there’s no contribution to pay us—and that’s completely fine. We never charge our employee clients, no matter the outcome.

If you decide not to sign, we’ll still guide you through alternative options and support you in making an informed decision. At Settlement Advice 4U, your rights and peace of mind are our top priorities.