Settlement Agreement, Compromise Agreement | Employment Legal Advice Scotland
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Settlement agreements

You may find yourself in a situation where you have been advised by your employer that they are “paying you off”. This can be a worrying time and not often much notice is given to you. Your employer might issue you with a Settlement Agreement and advise that you have a timescale in which to make a decision.

A Settlement Agreement, formerly known as a compromise agreement, is a contract between an employee and an employer where the employee agrees not to pursue an employment related claim or claims against the employer, usually in return for payment of compensation for the employee.

This normally involves the mutual termination of the employee’s employment.  The benefit of entering into a Settlement Agreement is that it offers a clean break between the employer and employee where the potential for a dispute exists.

Employee benefits of entering into a settlement agreement

Quicker process: A Settlement Agreement also avoids the length of time a case will take to reach the point of a decision being made and the expense of litigation.

Compensation guaranteed: Agreeing to give up the right to pursue an employment tribunal claim in turn for payment of agreed compensation takes away the risk of pursuing an employment tribunal or court case and being unsuccessful. This offers the certainty of receiving compensation within an agreed timescale.

Tax Free payment: An agreed lump sum for payment of compensation for loss of employment can be paid tax free up to £30,000.

Confidentiality: The facts and terms of a Settlement Agreement are normally kept confidential to the employee and employer other than for disclosure to professional advisers and the employee’s immediate family.

Reference: An employer will often agree to provide a reference to the departing employee to provide to prospective employers. This is a benefit to the employee as an Employment Tribunal has no power to order an employer to provide a reference.

Settlement Agreement Legal Advice

At Digby Brown, our employment solicitors can handle your concerns in a very tight timescale as they are more than familiar with providing relevant advice to employees in these types of situations.

You will require independent legal advice on the terms and effect of the settlement agreement. The employer will include payment or a contribution towards legal fees for receiving this advice as part of the terms of the Agreement. If terms require to be negotiated with the employer the fee would increase depending on the time involved.

Our solicitors can provide this advice in a straightforward and professional manner using the benefit of their experience.  We can respond quickly to clients who require this technical advice at short notice.  

Where an exit from a business is being considered, we can provide representation for you and negotiate your preferred terms on your behalf to deliver an agreement tailored to the specific circumstances.

Settlement Agreement Client Testimonial

“Digby Brown have been actively involved in providing advice and professional representation to employees in the Oil and Gas industry.  This has included negotiating exit terms and reaching agreement on contractual employment restrictions.”

“I would recommend Digby Brown for the following reasons. I was advised by both Ross Milvenan on Employment Law and also Digby Brown’s Injuries Department. I received clear and unambiguous advice on my circumstances and I was given clear options for proceeding on both Employment Law and Injuries compensation. Ross helped me negotiate my preferred solution with straight forward advice. I managed to get through a very difficult time with minimal confrontation."



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