What should a settlement agreement include?
A settlement agreement needs to identify what each party promises and the particular claims being settled. It also needs to meet the legal conditions for waiving statutory employment claims. A complete document deals with money, dates, obligations and any agreed arrangements after employment ends.
Identify the parties and employment arrangements
Check the employer’s legal name, your details and the employment dates. If employment will end, confirm the termination date and notice arrangements. Distinguish working notice, payment instead of notice and any agreed period away from work while employment continues.
These entries are not administrative details to leave unchecked. They affect the payment calculation, benefit end dates and the events the agreement records.
Give each payment its own description
Identify outstanding salary, holiday, notice, bonus or commission, any redundancy payment and additional compensation. State when each is due and which deductions apply. Clarify any condition attached to payment.
Read the tax provisions alongside the breakdown. An agreement describing everything as compensation does not decide the tax treatment. A tax indemnity can place obligations on the employee if further tax becomes due, so ask for its scope to be explained.
Identify the claims being settled
The waiver needs to address particular complaints or proceedings and satisfy the applicable statutory requirements. Ask the independent adviser which rights are being waived and which claims or rights are excluded. Do not rely on a broad heading without understanding the operative wording.
The agreement needs to identify the eligible independent adviser and record compliance with the legal conditions. The advice must address the terms and effect, including the impact on the ability to pursue the relevant claims.
Record the nonfinancial terms
If a reference is agreed, attach the wording. Consider how verbal reference requests and internal announcements will be handled. Read restrictions on future work, confidentiality, statements about the parties, property returns and assistance after departure.
Check any warranty requiring you to confirm circumstances, such as another job offer. Confirm only what is accurate. If a clause allows repayment or withholding money after a breach, understand the trigger and amount before agreeing.
Confidentiality clauses cannot prevent a legally protected disclosure or reporting a crime to the police. The agreement needs appropriate exceptions and clarity about permitted recipients.
How to write a settlement agreement
If you are searching for a template, begin with the terms you want recorded and obtain legal drafting advice. A template contains options, not a conclusion about which clauses fit your case. ACAS provides a template with guidance, but it does not replace the required independent advice.
Employees need not produce the entire legal document to begin discussions. A list of proposed terms can be the starting point. Keep drafts marked and dated so the final version can be checked against the agreement reached.
Questions employees ask
Is an agreed reference automatically included? No. If it matters to the settlement, request the wording and arrangements in the document.
Does an AI generated agreement meet the legal requirements? Generating text does not establish validity or provide the required independent advice. The document and advice requirements need separate attention.
Get advice on the proposed clauses
An omitted promise or misunderstood restriction can remain a problem after payment. A Belonge Case Assessment reviews the draft agreement, attachments and employment correspondence. The £149, one hour assessment includes a written report with findings and recommended actions.
Belonge does not provide statutory settlement agreement sign off.