Types of settlement agreements

Settlement Agreements are agreements that are made between an employer and employee that are usually made to settle any employment claims that the employee has against the employer. The employee must seek independent legal advice before agreeing to it to ensure that they are being treated fairly and understand the terms they are signing.


Settlement Agreements were previously known as ‘Compromise Agreements’ before several laws changed in 2013. Technically, the Settlement Agreement is a legal contract that is drawn up between the employer and employee to confirm the termination of the employment and ensure that the employee will not, in exchange for compensation, bring any legal claims toward the employer arising out of their employment or termination.

Typical claims that the employee might have include unfair dismissal, workplace discrimination, or breach of contract. Legally, an independent legal advisor must be used by the employee who will be able to advise you on the terms and effects of the offer of a Settlement Agreement. This is for several reasons:

  • To ensure that the agreement is valid – the Settlement Agreement must adhere to certain legal requirements
  • To ensure that the agreement meets your interests – Settlement Agreements can be complicated and multi-faceted and the solicitor will be able to check that it meets your interests and that you are clear about what you are getting and signing
  • To ensure that you are aware of the value of potential claims – If you decide not to take the Settlement Agreement you might be able to make a claim against the company and should be aware of the potential value of these claims to help you to make the best decision and understand you are giving up your right to bring these claims

Why should you look to settle?

It is unfortunate that some employments end in dispute between the employer and employee. Settlement Agreements are an option in these circumstances to resolve these disputes, leaving both parties comfortable that the dispute has been settled. It provides certainty to both parties and helps to protect employers from claims being made against them. Once the Settlement Agreement has been signed by the employee, they will no longer be able to take a claim out against the employer and there will be a final and binding agreement in place.

It is important to remember that as an employee you do not have to agree to the Settlement Agreement if you do not believe that it is in your best interest. Likewise, employers do not need to make an offer, but should be aware that they then run the risk of a claim being made against them. This is a major reason why it is important to seek independent legal advice.

If you think that you are viable for a Settlement Agreement, you should start by getting legal advice to find out whether you have a case. Experienced and professional solicitors like us here at Waldrons will be able to discuss your case with you to help you to make the best decision. If you are still working and planning on resigning, do not resign before receiving legal advice, as this may weaken your case.

Written offers of settlement

When it comes to trying to settle an employment dispute through a Settlement Agreement, there are four different ways that this can be done:

A ‘Part 36’ Offer

A Part 36 offer is an offer that is made in accordance with Part 36 of the CPR. This means that agreement to the offer should be made within (normally) 21 days of the date of the offer being made. The usual outcome is that the costs of the winner will not be paid for by the loser. The idea behind a Part 36 offer is that the issue is settled quickly and that those who make sensible offers are protected.

A ‘Without prejudice save as to costs’ offer

This refers to cases that go to trial. In this case, the offer that was made cannot be referred to in the trial except when referring to costs. This means that the judge will not be able to use the existence of the offer as a point of weakness but will be able to consider it at the point that they are deciding what costs to make.

A ‘Without prejudice’ Offer

A ‘Without Prejudice’ offer is a valid offer but cannot be used in any way including in arguments relating to costs at the end of the proceedings.

An ‘Open’ Offer

An ‘Open’ offer can be used during the trial – often to show that the employer is being reasonable – but this is rarely used.

Form of Settlement

It is important that, where possible, settlements are made in writing, and preferably in one document. Verbal agreements are not encouraged.

Contact Waldrons solicitors

If you are in a situation where you believe that you have a case for a Settlement Agreement, get in touch with our expert team here at Waldrons Solicitors to discuss your case.

More information on Settlement Agreements

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Last reviewed on 11/07/23 by Maariyah Yacub who is a Solicitor