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come to an agreement

Settlement Agreements formerly known as Compromise Agreements are documents which set out agreed terms and conditions between an employer and employee. This is when they agree to settle any potential employment tribunal claim or other employment issue outwith court by way of agreement. This form of resolution can avoid prolonging a dispute, reducing the time, cost and stress involved in a tribunal claim.

settlement agreement
lawyers in Scotland

The legislation governing the negotiation of settlement agreements is set out under section 111A of the Employment Rights Act (ERA) 1996. In particular, it provides guidance on confidentiality provisions related to negotiations which have taken place to reach any settlement agreement. The gist of this is that discussions or negotiations had with an employer prior to signing any settlement agreement can be treated as confidential.

Therefore, if an agreement is not achieved, the negotiation may not be admissible as evidence, if subsequently an unfair dismissal claim is raised in an employment tribunal or other court proceedings initiated. There are however some exceptions to the application of section 111A.

Whether you have a dispute with your employer; your employment is coming to an end or you are being paid an enhanced redundancy payment, settlement agreements are a tool used to assist ending the employment relationship in a way which is mutually beneficial to the employer and employee. Settlement agreements are legally binding contracts, they must be in writing and they have the effect of waiving an employee’s rights to bring a claim to a tribunal which is listed within the agreement. The employee will often receive some form of monetary settlement and a reference from the employer to assist the employee in finding new employment, if necessary.

what to consider for a
settlement agreement
in Scotland

Factors which may be considered in deciding on the financial sum offered in settlement may include; what your contract specifically sets out; the length of employment; the possible time it may take to resolve the issue if no settlement is achieved; how difficult it may be to fill the post; the likely time it will take for the employee to gain new employment; reasons for offering settlement and the potential costs which could be incurred in dealing with any future tribunal or court action if agreement is not reached. They can be drawn up at any stage during an employment relationship. Settlement Agreements are, however, entered into completely voluntarily, and there is no obligation for an employee to accept a settlement agreement. Terms are usually arrived at following discussion and negotiation. Parties are not obliged to agree to terms first proposed, there is usually a negotiation involved whereby both parties have the opportunity to put forward offers and counter-offers.

Employees should be given a period of time to consider the terms of any proposed agreement. The Acas Code of Practice on Settlement Agreement recommends providing employees with at least 10 days to consider the proposal. It is essential to obtain independent advice prior to signing any Settlement Agreement and we can provide you with such advice to ensure you have a clear understanding of what is proposed to you. We can also negotiate with your employer on your behalf, to aim to get you the best deal possible. Whether you are an employer or employee, we have experience of negotiating and advising on Settlement Agreements across a variety of sectors and can advise on a range of circumstances. Contact a member of our team today for more information on Settlement Agreements.

settlement agreement

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James Morrison


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Martha Clark


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Louisa Doole

Associate Solicitor

what our
clients have to say

Please pass my thanks to Miss Doole for her comprehensive professional advice which has permitted this matter to be concluded quickly and to my satisfaction.

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