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Compromise & Settlement Agreements

Compromise AgreementsHave you found yourself in a situation where both you and an employee have decided that it would be best to amicably part ways?  You can ensure that your interests are protected by instructing us to draft a settlement agreement between you and your employee.

What is a Settlement Agreement?

A settlement agreement is a confidential, legally binding agreement between an employee and an employer. The most usual type of agreement involves an employer making a severance payment to the employee in return for the employee agreeing to take no further action regarding the matter in the Employment Tribunal or any Court.

What are the Advantages of Entering into a Severance Agreement?

A severance agreement provides an employer with the following advantages:

  • Certainty – a settlement agreement provides both you and your employee with certainty surrounding the settlement amount and the knowledge that no further action regarding the situation can be brought.
  • Compromise – both you and your employee will have the opportunity to negotiate and compromise on the terms of the agreement together in a non-hostile environment.
  • Confidentiality – as an employer you are ensuring that the details of the matter which led to the severance of the employment relationship are kept private so your businesses name and reputation are protected.

Protecting Your Interests as an Employer During the Negotiating of a Settlement Agreement

There is a statutory Code of Practice issued by ACAS which can help guide employers through the legal requirements designed to ensure agreements are reached in a fair manner.

Points to be aware of to ensure you do not run the risk of an unfair dismissal case being brought against you due to the way you have implemented and/or negotiated the settlement agreement include:

  • Keep in mind that all pre-termination negotiations will only be ‘without prejudice’ (unable to be shown or mentioned in a Court) if there is no ‘improper behaviour’ (such as undue pressure on the employee).
  • The best situation is where the employee opens up talks with their employer, perhaps because they want to avoid the stress of a lengthy dismissal process.
  • Make sure that as an employer you do not leave yourself open to the claim that termination was ‘inevitable’ and therefore the employee had no option but to sign the settlement agreement as this could also constitute ‘improper behaviour’.

How We Can Help

Our specialist employment lawyers can help you negotiate and agree a settlement agreement and advise you of your statutory obligations to ensure that the advantages of certainty, compromise and confidentiality remain available to you after the agreement is signed.

If you wish to discuss drawing up a settlement agreement further then please fill in our ‘request a callback’ form on the right-hand side of this page or phone us on 020 3588 3500 to talk with one of our employment team


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March 8, 2016

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