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Employment Settlement Agreements


Employment Settlement Agreements ( ESA’s) at W.Davies & Son Limited

Settlement Agreements under the Employment Rights Act are really useful documents. They are useful to both employers and employees. They can be used to compromise virtually every employment situation including disciplinary procedures and redundancies, and the imposition of new contracts.


Because they make it possible for employment disputes to come to an end peacefully. There is usually something in the agreement for everyone.

Typically, when employment comes to and end, the employee will receive a sum of money to tide them over while they find a new job (notice money, holiday pay and perhaps a tax free ex gratia payment) and a reference. Meanwhile the employer will, through the settlement agreement, ensure that it does not have to face any claims from the employee and that the employee will behave properly after the employment is at an end regarding company clients and other company property.

Why do I need a solicitor?

Because (unless you settle your dispute through acas), the Employment Rights Act 1996 (ERA1996) and many other Acts dealing with employment say so. You can’t have a binding deal without the employee being advised of their rights before they agree to compromise them.

This is important. Employers and Employees have contrary interests. Not all employers are generous and sensible. Not all employees have good and honest intentions. The settlement process tends to restore calm and ensure that parties in dispute disengage peacefully. The settlement agreement ensures that they also remain mindful of their ongoing obligations and the financial consequences of breaking them.

How is it done?

The employer usually makes an offer to enter into a Settlement Agreement (ESA) and will do so either with a “Protected Conversation” under Section 111A Employment Rights Act and / or “Without Prejudice Save as to Costs” negotiations.

The agreement is usually drafted by the employer’s lawyer and will be sent to the employee’s lawyer so that they can advise on the agreement and make suitable alterations.

What will the advice cost?

The employer will usually make a substantial financial contribution to the employee’s legal costs because it is in their interests to do so. This will often cover all of the employee’s legal costs depending upon how complex or lengthy the discussions are leading to settlement. There is no obligation to pay costs on either side.

What should I do?

If you have a workplace problem and you think it should be resolved by your employee leaving or you as an employee wish to leave your employer then speak to us by email or telephone.

What should I find and bring with me to a consultation?

If possible, bring:

  • The settlement agreement draft itself (and an electronic copy if possible)
  • The contract of employment and or handbook (perhaps containing policies)
  • Any pension or benefit documentation

Having these documents saves time and sometimes advice (especially about obligations after employment ends) cannot be given without them.

What does Without Prejudice mean?

It means that so long as the people having the discussion are genuinely discussing compromising their legal rights, those discussions can take place in secrecy from the Judge.

This is important because if the settlement negotiations are not successful, the employer and employee will wish to rely on their rights in Tribunal. They will not wish the without prejudice discussions perhaps containing offers to compromise those rights, or admissions which might damage them in Tribunal to be read out before the Tribunal or Court has given judgment. The system enables the employer and employee to make offers to settle. Courts can see the without prejudice discussions after they have decided the case and adverse costs consequences may follow if reasonable offers to settle have been refused.

There are procedures available for where an employer or an employee abuses protected conversations or without prejudice privilege. Privilege and protected conversations can be complex subjects and lawyers on both sides try and keep both sides safe by making sure protection is in place.

What will the ESA document look like?

Agreements vary from the very simple to the fairly complex.

Essentially the agreements deal with:

  • Identity
  • What rights are being compromised (and which are not)
  • Payments to be made and tax on them
  • The return or retention of company property
  • Obligations after employment ends
  • Notices to staff
  • References

What about Tax and National Insurance?

Agreements can often be adjusted to take advantage of tax concessions available from HMRC.

What now?

Employment Settlement Agreements get rid of employment problems and get busy and anxious employers and employees where they need to go. Both sides of the deal need legal advice which is generally comparatively inexpensive.

Why Choose Us?

We can provide a full legal service from the start to conclusion of any employment law matter or can be consulted on any discrete or specific problem at any stage.

Costs & Pricing

We charge on an hourly rate basis and each of our solicitors has their own hourly rate.

The hourly rate is based on expertise, experience and years of qualification. Our fees may also reflect the complexity of the individual matter, the value involved or the special skills required.

Our hourly rates range from £180 to £300 plus VAT.

Find out more about our pricing here.

Get In Touch

For more information or to make an appointment with one of our Employment solicitors in Woking, get in touch with Andrew, Caroline or Freddie or call us on 01483 744 900