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📋 Toolbox Talk · Employment Rights

Settlement Agreements:
Before You Sign

What you give up, what makes the agreement binding, the money and tax, and your time limit.

📅 Last reviewed: October 2026📚 Acas · GOV.UK · HMRC · LRA🇬🇧 England, Wales & Scotland, with a Northern Ireland slide (compromise agreements)ukworkrights.co.uk

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What it is

A legally binding contract

You give up the right to make the claims the agreement specifically covers, usually in return for a payment.
It is voluntary. You do not have to sign one.
Saying "full and final settlement of all claims" is not enough: it must name the claims.

Binding or not

The legal conditions

It must be in writing and relate to a particular complaint or proceedings.
You must get advice from a relevant independent adviser on its terms and effect.
The adviser must be insured and named in the agreement.
The agreement must state that the legal conditions are met.

⚠ Watch out

Without a named, insured, relevant independent adviser, it does not stop you making a tribunal claim on those statutory rights.

Advice and time

Who advises, and how long you get

The adviser can be a qualified lawyer, a certified trade union adviser or a certified advice centre worker. They must not act for your employer.
Your employer should consider paying for the advice, but does not have to.
The Acas Code of Practice recommends at least 10 days to consider the offer. That is a recommendation, not a fixed legal deadline.

The money

What is taxed

The first combined £30,000 of qualifying termination payments (such as redundancy pay and extra severance) is usually tax free.
Notice pay, pay during gardening leave and pay you have already earned are taxed as normal.
Legal costs your employer pays directly to your solicitor are not taxed.

The talks

Can it be used against me?

Settlement talks usually cannot be used as evidence, under the "without prejudice" principle and section 111A of the Employment Rights Act 1996.
Section 111A covers only unfair and constructive dismissal claims, not automatically unfair dismissal such as for whistleblowing.
Improper behaviour, such as bullying or putting undue pressure on you, can make the talks usable as evidence.
A confidentiality clause cannot stop you whistleblowing or reporting a crime to the police.

Settlement agreements

Your time limit

Talking about a settlement does NOT pause the tribunal time limit.
Most claims: 3 months less 1 day, or 6 months less 1 day where the act happened on or after 1 October 2026.
Notify Acas within your time limit to pause the clock. An agreement reached through Acas (a COT3) does not need independent legal advice.

Northern Ireland is different

Compromise agreements in Northern Ireland

They are still called compromise agreements (Article 245 of the Employment Rights (Northern Ireland) Order 1996).
The same idea: in writing, about the particular proceedings, advice from an insured relevant independent adviser who is named.
There is no "protected conversations" law: section 111A does not apply. Ask the LRA or a solicitor whether talks can be used as evidence.
Most claims: 3 months less 1 day. Telling the LRA within the time limit stops the clock for up to 1 calendar month, plus up to 14 more days if both sides agree.

Common questions

Frequently asked questions

Do I have to sign?

No. Settlement agreements are voluntary.

Is all of the payment tax free?

No. Usually only the first combined £30,000 of qualifying payments. Notice pay and earned pay are taxed.

Does negotiating stop my tribunal deadline?

No. Only early conciliation through Acas (or the LRA in Northern Ireland) pauses it.

Free rights guidance

Check your rights
before you sign

Get plain-English guidance on your rights and your employer's legal duties.

Acas

0300 123 1100

acas.org.uk

LRA (Northern Ireland)

03300 555 300

Labour Relations Agency

Citizens Advice

England 0800 144 8848

Wales 0800 702 2020 · Scotland 0800 028 1456

Advice NI

0800 915 4604

Northern Ireland

UK Work Rights — Free guide

Settlement Agreements (England, Wales and Scotland)

ukworkrights.co.uk/guide-settlement-agreements-gb.html

General rights guidance only — not legal advice · © UK Work Rights Ltd · Company No. 17228507 · ICO Registration No. ZC239465 · Registered office: 71–75 Shelton Street, Covent Garden, London, WC2H 9JQ · hello@ukworkrights.co.uk
Published by UK Work Rights Ltd
Drafted with AI assistance, using official sources.
Contains public sector information licensed under the Open Government Licence v3.0.

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