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Settlement Agreements

What is a settlement agreement?

A settlement agreement (formerly known as a compromise agreement) is a written and legally binding contract between an employer and employee. It is a legal way of drawing a line under the employment relationship so that both parties can move on. The employee agrees to waive his or her right to claim anything further from the business and in return the employer usually makes a severance payment.

They are most commonly used where an employment contract is being terminated - for example, in a redundancy situation - or when an employment dispute is being resolved.

In order for an employee to validly waive their statutory rights, they must receive independent legal advice on the terms of the agreement.

Some of the most commonly asked questions about settlement agreements are answered by our employment team here: 11 answers for employees who have been offered a settlement agreement.

How can we help?

We regularly advise employees who are offered a settlement agreement. It can be a daunting and confusing process, so we are here to explain everything and assist you in making the right decision. The employer usually pays or makes a contribution towards the legal fees incurred by an employee receiving legal advice on a settlement agreement.

We also specialise in advising employers on when settlement agreements should be used. Often mutual agreed exits can be the most time and cost efficient method of parting ways with your employees – either because they are no longer right for the business or because their duties are no longer required.

Some examples of our work are:

  • Negotiating the exit of a CEO from a financial service company based in the City.
  • Advising a software engineer on the terms of a settlement agreement after he had become too unwell to continue working.
  • Drafting a settlement agreement to be used as part of a team restructure involving several redundancies.

If you would like to get in touch with our employment team, please contact us on 020 7234 0200 or

Anthony Purvis

Partner, Employment Law

Anthony offers succinct and practical advice to both businesses and individuals on various issues including redundancies, unfair and wrongful dismissals claims, unlawful discrimination, grievance and disciplinary procedures, TUPE, staff handbooks, contracts of employment, restrictive covenants and their enforcement, settlement agreements and the employment aspects of corporate reorganisations or sales. Read more...

Matthew Hodson 

Senior Associate, Employment Law

Matthew handles all types of employment matters. He represents and advises employees and employers on issues involving whistleblowing, discrimination, redundancies, unfair and wrongful dismissal, TUPE, Working Time Regulations, restrictive covenants and settlement agreements.  Read more...


Jamie Webster

Associate, Employment Law

Jamie moved to Waterfront in 2021 after completing his training at Keystone Law. Prior to his training contract Jamie had a previous career in the hospitality sector in Bath. Jamie is an Associate in the Employment team assisting with all types of employment matters, both contentious and non-contentious. Read more...