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A settlement agreement is often referred to as a ‘severance’ or ‘redundancy agreement’ and previously known as a ‘compromise agreement’.

In short, a settlement agreement is a legally binding contract that prohibits employees from suing their employer, usually after the employee has received a sum of money.

In the majority of cases, a settlement agreement will hold advantages for both the employee and the employer. After all, not many people really want to deal with the uncertainty, acrimony and publicity that employment tribunal cases sometimes involve. Settlement agreements – as long as they’re drafted properly – constitute a swift and certain route to bring a dispute to a close.

The employer receives the certainty that an employee can no longer take them to an Employment tribunal and the employee receives a financial package without the costs or risks of litigation.

Properly drafted settlement agreements are legally binding, which is why the law says they are only valid if the employee has taken independent legal advice on the terms and effects of the settlement agreement before signing.

In most cases, the employer will contribute towards your legal costs of receiving this advice.

For independent legal advice contact Neil Cronin today on 01282 422711 or email