Settlement Agreements for Employers

Practical employment law advice to help employers negotiate employee exits, manage risk and achieve greater certainty when employment relationships end.

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Settlement agreements can provide employers and employees with a mutually agreed way to resolve a workplace dispute or bring an employment relationship to an end. They can provide greater certainty over the terms of departure while reducing the risk, cost and management time associated with lengthy internal procedures or Employment Tribunal claims.

DTM Legal advises employers on settlement agreements arising from redundancy, performance or conduct concerns, long-term sickness absence, workplace disputes and breakdowns in employment relationships. We help employers decide whether a settlement agreement is appropriate, determine how and when an offer should be made and structure terms that reflect the organisation’s commercial objectives.

Our Employment & HR solicitors can support you from the initial strategy and protected conversation through to negotiation and completion of the agreement. We draft bespoke terms covering payments, confidentiality, references, restrictive covenants and other exit arrangements while ensuring the necessary legal formalities are addressed.

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Settlement Agreement Legal Services

We provide practical advice and support across a wide range of settlement agreement matters, including:

  • Advising whether a settlement agreement is appropriate
  • Planning the timing and approach to settlement discussions
  • Advising on protected conversations under section 111A
  • Without prejudice negotiations
  • Preparing initial settlement proposals
  • Drafting bespoke settlement agreements
  • Negotiating financial settlement terms
  • Notice and payment in lieu of notice
  • Holiday pay, bonuses and commission
  • Redundancy and enhanced termination payments
  • Tax treatment of termination payments
  • Agreed employment references
  • Confidentiality and non-disclosure provisions
  • Non-disparagement clauses
  • Restrictive covenants and post-termination obligations
  • Return of company property and information
  • Announcements and communications about an employee’s departure
  • Director and senior executive settlement agreements
  • Settlement agreements connected with redundancies and restructures
  • Settlement following performance, capability or disciplinary concerns
  • Settlement of grievances and discrimination complaints
  • Negotiating with the employee’s solicitor or representative
  • Advice on alternative routes where settlement cannot be agreed

Why Instruct DTM Legal?

A settlement agreement should reflect both the legal risks surrounding the employment relationship and the practical outcome the employer wants to achieve. Our Employment & HR team helps you assess the circumstances before deciding whether a negotiated exit is preferable to continuing with an internal procedure.

We provide clear and commercially focused advice on the proposed financial package and wider terms. This includes considering notice, outstanding contractual payments, references, confidentiality, restrictive covenants and the claims the employee will agree not to pursue.

We also help employers manage settlement discussions appropriately. Protected conversations and without prejudice discussions do not provide blanket confidentiality in every situation, so the way an offer is introduced and negotiated can be important if agreement is not ultimately reached.

We provide:

  • Practical and commercially focused employment law advice
  • Clear guidance on when a settlement agreement may be appropriate
  • Bespoke agreements tailored to the circumstances of the exit
  • Strategic support with protected conversations and negotiations
  • Advice on settlement payments and contractual entitlements
  • Appropriate confidentiality and business protection provisions
  • Responsive support through to completion of the agreement

Get in Touch

Whether you are considering an agreed employee exit, responding to a workplace dispute or need support negotiating settlement terms, our Employment & HR team can help you develop a practical and commercially appropriate approach.

To discuss your requirements, contact us by emailing employment@dtmlegal.com or calling 01244 354 800 / 0151 321 0000.

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Partner / Head of Employment & HR
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Key Considerations When Managing Employee Performance

Considering your objectives and the employee’s wider circumstances before making an offer can help you structure an appropriate proposal and manage the conversation effectively. Read our Key Considerations guide to understand some of the points a solicitor may wish to discuss when responding to your enquiry. It can help you prepare the relevant information and make your initial conversation more productive.

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DTM Legal
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Employment & HR Team

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Tom Evans

Partner / Head of Employment & HR
Louise Harcombe, Associate, Employment (1)
Louise Harcombe

Associate, Employment & HR
Michelle Roby, Chartered Legal Executive Employment & HR
Michelle Roby

Chartered Legal Executive, Employment & HR

Frequently Asked Questions

Commonly asked questions from employers regarding Settlement Agreements.

A settlement agreement may be appropriate where both parties could benefit from bringing the employment relationship or an existing dispute to an agreed conclusion. Common examples include redundancy, performance or conduct concerns, long-term absence, grievances and situations where trust and confidence have broken down.

It should not automatically replace a fair employment process. Employers should consider what procedure would need to be followed if the employee declines the proposed settlement.

No. Settlement agreements are voluntary and the employee is entitled to reject the offer or propose different terms. Employers should not suggest that an employee has no choice but to accept.

If agreement cannot be reached, the employer will usually need to decide whether to continue the employment relationship or follow the appropriate disciplinary, capability, redundancy or other process.

A valid settlement agreement must satisfy specific statutory requirements. Among other things, it must be in writing, identify the particular claims being settled and the employee must receive advice from an appropriate independent adviser on the terms and their effect on the employee’s ability to pursue those claims.

The agreement should therefore be drafted carefully rather than simply stating that all possible employment claims have been settled.

The employee must obtain independent advice for the settlement agreement to meet the relevant statutory requirements. It is common for the employer to contribute towards the cost of this advice.

Employers will typically contribute between £350 + VAT and £750 + VAT, depending on the complexity of the agreement. The amount offered should be set out clearly when the settlement proposal is made.

No. The £30,000 threshold does not apply automatically to every payment made under a settlement agreement. Salary, holiday pay, bonuses and relevant notice payments are generally taxable as earnings.

Certain qualifying termination payments may fall within the £30,000 income tax threshold, while amounts above it are taxable. The precise treatment depends on the nature of each payment, so the different elements of a settlement package should be identified clearly.

What our Clients Say

See what our customers have to say about their experience

Review Solicitors Stars
5/5 350+Reviews
Steve Tatham
26/04/2026
Tom Evans provided an excellent service regarding my recent Voluntary Redundancy. Tom was friendly, knowledgeable and helpful in supporting the processing of the legal documentation around redundancy. Tom was very timely and managed our sessions well to ensure we didn’t overrun. I would highly recommend Tom and use him again if I needed legal support.
Ellie
27/10/2025
DTM’s employment department has dealt with a couple of matters on our behalf. They have dealt with all matters efficiently, providing clear advice on employment law, whilst also understanding the commercial aspects of suggested actions.
Mia
15/10/2023
They feel like an extension to our business. They fully understand our business inside and out and are very responsive and provide a huge level of support.

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