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Draft my settlement agreement — free preview →SETTLEMENT AGREEMENT
Without prejudice and subject to contract until signed by both parties and the adviser's certificate is completed
This Agreement is a settlement agreement for the purposes of section 203(3) of the Employment Rights Act 1996 and the corresponding provisions listed in clause 7.3.
THIS SETTLEMENT AGREEMENT is made on __________
BETWEEN:
(1) __________ (Company Number: __________), whose registered office is at __________ (the "Employer"); and
(2) __________ of __________ (the "Employee").
BACKGROUND
(A) The Employee has been employed by the Employer as __________ since __________ under a contract of employment dated __________ (the "Employment Contract").
(B) The Employee's employment will terminate on __________ (the "Termination Date") by reason of __________.
(C) The parties have agreed the terms on which the employment ends and on which the Employee's claims against the Employer are settled, without any admission of liability, as set out in this Agreement.
AGREED TERMS
1. DEFINITIONS AND INTERPRETATION
"Adviser" means __________ of __________, the relevant independent adviser who has advised the Employee on the terms and effect of this Agreement.
"Group Company" means the Employer, any subsidiary or holding company of the Employer, and any subsidiary of any holding company of the Employer, each as defined in section 1159 of the Companies Act 2006.
"Termination Payment" means the sum described in clause 4.1.
Clause headings are for convenience only. References to statutes include any amendment, re-enactment or subordinate legislation.
2. TERMINATION OF EMPLOYMENT
(2.1) The Employee's employment with the Employer terminates on the Termination Date. [The Employee is not required to work during the period up to the Termination Date and shall remain on garden leave on full pay and benefits.] The Employee shall work normally up to the Termination Date.
(2.2) The Employer shall pay the Employee's salary and contractual benefits up to and including the Termination Date in the usual way, less deductions for income tax and National Insurance contributions.
(2.3) The Employer shall pay the Employee £__________ in respect of __________ days' accrued but untaken holiday the Employee confirms that all accrued holiday has been taken, less deductions for income tax and National Insurance contributions, with the final salary payment.
(2.4) [Notice: the Employee is entitled to __________ notice. The Employer shall pay the Employee £__________ in lieu of the whole of that notice period, less deductions for income tax and National Insurance contributions, within __________ days of the later of the Termination Date and receipt by the Employer of this Agreement signed by the Employee and the Adviser's certificate.] [The Employee has worked their full notice period and no payment in lieu of notice is due.]
(2.5) Save as set out in this Agreement, the Employee has no entitlement to any further salary, bonus, commission, holiday pay, benefits, notice pay or other sum from the Employer or any Group Company.
A settlement agreement is the legally binding way for an employer and employee to end employment (or resolve a dispute) on agreed terms, with the employee giving up the right to bring tribunal claims in return for a payment. Strict statutory conditions apply, and if they are not met the waiver is worthless.
Under section 203 of the Employment Rights Act 1996 and the parallel provisions in the Equality Act 2010 and elsewhere, the agreement must be in writing, must relate to the particular claims being waived (a general waiver of 'all claims' is not enough, so they are listed), and the employee must have received advice on its terms and effect from a relevant independent adviser — usually a solicitor — who is identified in the agreement and covered by insurance. The agreement must state that these conditions are satisfied, and the adviser signs a certificate. The employer normally contributes to the employee's legal fees.
Termination date and reason; whether notice is worked, paid in lieu or spent on garden leave; accrued holiday; the compensation payment, when it is paid and on what conditions; and the tax treatment. The first £30,000 of a genuine compensation payment can be paid free of tax under sections 401 to 403 of the Income Tax (Earnings and Pensions) Act 2003, but post-employment notice pay is always taxable, so the draft separates them and includes a tax indemnity. Also: benefits and pension, bonus and share schemes, return of property, resignation from any directorships, confidentiality of the terms and the circumstances, mutual non-derogatory statements, an agreed reference and announcement, and withdrawal of any tribunal claim.
Claims for personal injury not yet known about, accrued pension rights, and the right to enforce the agreement itself. Protected disclosures (whistleblowing) and reports to regulators cannot be restricted. If the agreement is signed before the termination date, a short reaffirmation letter on the final day covers claims arising in between.
Yes, or another relevant independent adviser such as a certified trade union official. Without that advice the waiver of statutory claims is not binding.
By convention the employer contributes a fixed sum, typically a few hundred pounds, paid directly to the adviser. The draft includes the clause.
Up to £30,000 of genuine compensation for loss of employment can be, but any payment for notice is taxed as earnings. The agreement separates the two and explains the treatment.
Yes. No settlement agreement can prevent protected disclosures or reports to regulators, and the draft says so.
If ACAS is involved, a COT3 agreement can be used instead and does not need independent advice. Scorpia's draft is the private settlement agreement route.
No. Scorpia is software that drafts and checks documents. It is not a law firm and does not give legal advice. For a dispute, a company sale or anything unusual, use a solicitor.