Settlement Agreement Template
Free settlement agreement template for UK employers. Comprehensive template with guidance on terms, payments, and legal requirements.
Use this template as a starting point for settlement agreements.
Important Notice
This template is for guidance only. Settlement agreements are complex legal documents and should be reviewed by a qualified employment lawyer before use. The terms should be tailored to each situation.
Settlement Agreement Template
SETTLEMENT AGREEMENT
Dated: [Date]
Between:
(1) [Company Name] (registered number [X]) whose registered office is at [Address] (the "Employer")
and
(2) [Employee Name] of [Address] (the "Employee")
Background
A. The Employee has been employed by the Employer as [Job Title] since [start date].
B. The parties have agreed to terminate the Employee's employment on the terms set out in this Agreement.
C. The parties wish to record the terms of this Agreement in full and final settlement of all claims the Employee has or may have against the Employer arising out of or connected with their employment or its termination.
Agreed Terms
1. Definitions and Interpretation
1.1 In this Agreement:
"Adviser" means [Name], a [solicitor/certified trade union official/advice worker] who has advised the Employee on this Agreement.
"Claims" means all claims listed in Schedule 1.
"Termination Date" means [date].
"Termination Payment" means £[amount].
2. Termination of Employment
2.1 The Employee's employment with the Employer will terminate on the Termination Date by reason of [redundancy/mutual agreement/other].
2.2 The Employer will pay the Employee:
| Payment | Amount | Tax Treatment |
|---|---|---|
| Salary to Termination Date | £[X] | Subject to tax/NI |
| Payment in lieu of notice | £[X] | Subject to tax/NI |
| Accrued holiday pay | £[X] | Subject to tax/NI |
| Termination Payment | £[X] | Tax-free (first £30,000) |
| [Other payments] | £[X] | [Treatment] |
2.3 The Termination Payment will be paid within [14/28] days of the later of: (a) the Termination Date; and (b) receipt by the Employer of a copy of this Agreement signed by the Employee and the Adviser's certificate.
2.4 The Employee will return all Company property by the Termination Date.
3. Waiver of Claims
3.1 The Employee agrees to accept the terms of this Agreement in full and final settlement of all Claims they have or may have against the Employer, any Group Company, or their officers, employees or agents arising out of or connected with their employment or its termination.
3.2 The Claims include but are not limited to those listed in Schedule 1.
3.3 The Employee warrants that they have not presented any claim or complaint to an employment tribunal or court and will not do so after signing this Agreement.
3.4 The Employee warrants that they are not aware of any facts or circumstances that might give rise to any claim against the Employer other than those which have been disclosed to the Employer.
4. Legal Advice
4.1 The Employee confirms that they have received independent legal advice from the Adviser on the terms and effect of this Agreement and in particular its effect on their ability to pursue the Claims before an employment tribunal or court.
4.2 The Adviser's certificate is attached at Schedule 2.
4.3 The Employer will pay a contribution of £[500] plus VAT towards the Employee's legal costs, payable direct to the Adviser's firm upon receipt of their invoice.
5. Confidentiality
5.1 The Employee agrees to keep the terms of this Agreement and the circumstances leading to it confidential and will not disclose them to any person except:
(a) their immediate family members (on condition they also keep them confidential); (b) professional advisers; (c) as required by law.
5.2 The Employee agrees not to make any derogatory or disparaging statements about the Employer, its business, or its employees.
5.3 The Employer agrees that its senior management will not make derogatory statements about the Employee.
6. Reference
6.1 The Employer will provide a reference in the form set out in Schedule 3 in response to requests from prospective employers.
7. Announcements
7.1 The parties agree that any announcement regarding the Employee's departure will be agreed between them.
8. Restrictive Covenants
8.1 The Employee confirms that they remain bound by any post-termination restrictive covenants in their contract of employment.
[Or: The parties agree that the restrictive covenants in clauses [X] of the contract of employment are waived.]
9. Warranty
9.1 The Employee warrants that they have not done anything that would entitle the Employer to dismiss them summarily.
9.2 If this warranty is breached, the Employee will repay the Termination Payment.
10. General
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 This Agreement may be executed in counterparts.
10.3 This Agreement is governed by the laws of England and Wales.
Signatures
Signed by the Employee:
Signature: _________________________
Print name: _________________________
Date: _________________________
Signed for and on behalf of the Employer:
Signature: _________________________
Print name: _________________________
Position: _________________________
Date: _________________________
Schedule 1 - Claims
The claims waived include (without limitation):
- Unfair dismissal (Employment Rights Act 1996)
- Wrongful dismissal / breach of contract
- Redundancy payment claims
- Discrimination (Equality Act 2010)
- Equal pay
- Unlawful deductions from wages
- Working time claims
- Part-time workers / fixed-term rights
- TUPE claims
- Whistleblowing detriment
- Trade union membership/activities
- Any other statutory employment claims
Schedule 2 - Adviser's Certificate
I, [Adviser Name], of [Firm], confirm that:
- I am [a solicitor holding a current practising certificate / a certified official of a trade union / etc.]
- I gave independent legal advice to [Employee Name] on the terms and effect of this Agreement
- I explained the effect on their ability to pursue claims before an employment tribunal
- I have insurance covering the risk of a claim for negligent advice
Signed: _________________________
Date: _________________________
Schedule 3 - Agreed Reference
[Insert agreed reference wording]
Guidance Notes
Before Using This Template
| Step | Action |
|---|---|
| Take legal advice | Employer should consult solicitor |
| Without prejudice discussions | Negotiate terms first |
| Confirm scope | What claims are being settled? |
| Calculate payments | Ensure correct tax treatment |
Key Requirements for Validity
| Requirement | Must Have |
|---|---|
| In writing | Yes |
| Identifies specific claims | Yes |
| Independent legal advice | Yes |
| Adviser identified | Yes |
| Certificate attached | Yes |
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Frequently Asked Questions
- What is a settlement agreement?
- A settlement agreement is a legally binding contract where an employee agrees to waive their right to bring employment tribunal claims in exchange for a payment and/or other benefits. It's often used to end employment amicably.
- Does the employee need legal advice?
- Yes. For a settlement agreement to be valid, the employee must receive independent legal advice from a qualified lawyer, trade union official, or advice centre worker. The employer typically pays a contribution towards these costs (£250-500+VAT is common).
- What claims can be settled?
- Most employment claims can be settled, including unfair dismissal, discrimination, breach of contract, and redundancy disputes. However, some claims like pension rights and personal injury (if not yet known) may require special treatment.