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Making a settlement agreement with your employer

This advice applies to Wales

If you have a complaint against your employer which you could take to an employment tribunal, they might try to settle that dispute to stop you making a claim or taking an existing claim any further.

If your employer wants you to give up your right to go to a tribunal, there are only two ways they can do this legally:

  • negotiate a COT3 agreement through Acas
  • get you to agree to a ‘settlement agreement’

A settlement agreement might involve your employer promising to pay you a sum of money, stop treating you unlawfully or both.

The settlement agreement is a legal contract between you and your employer - you both have to stick to it. Your employer is likely to want you to keep the agreement confidential.

Your employer will usually pay for you to get independent legal advice. This is because if you sign a settlement agreement without getting independent legal advice first, you’ll still be able to go to an employment tribunal.

If you don’t want to negotiate with your employer, you can go to an employment tribunal instead. You’ll need to start early conciliation to do this.

Getting advice before negotiating

You should get advice unless you’re sure how much your case is worth, for example you know how much holiday pay you should have been paid. You can get advice from your nearest Citizens Advice or a local solicitor. Check if you can get help with legal costs if you’re not sure.

Make sure you have any relevant documents and dates to hand when you get advice. This could be your contract of employment, the date of the dispute and copies of any emails about settling it.

Negotiating the agreement

Your employer will discuss with you what should be in the agreement, either face-to-face or in writing.

Tell your employer if you need someone to help you because it could be hard for you to take part in the conversation - for example because of a disability or if English isn’t your first language.

They don’t have to let someone go with you, but it’s good practice for them to do so.

If the negotiations don’t lead to you settling the dispute, you won’t normally be able to refer to anything you discussed if you go to an employment tribunal. If you want to refer to those discussions, contact your nearest Citizens Advice for help.

Considering your employer’s offer

When you’re considering your employer’s offer, you should think about things like:

  • how strong your case is
  • how far off their offer is from what you could get
  • if you want to get your job back or keep your job with an agreement that your employer will make changes in your workplace
  • what else you could do if you don’t accept the offer
  • if the stress of making a tribunal claim is outweighed by what you could get if you win

If you’ve been getting Universal Credit, Income Support or Jobseeker’s Allowance and settle your claim you won’t have to pay that back. If you win a tribunal claim, the DWP will claim back what they’ve paid you. You should also bear in mind that the DWP won’t claim that back if you settle a claim.

If you think the offer is reasonable, it’s probably worth accepting.

If you don’t think it’s reasonable, you could ask them to increase it or decline the offer and go to a tribunal.

Contact your nearest Citizens Advice or a local solicitor if you need help deciding whether to accept your employer’s offer.

If you reach an agreement

Once you’ve reached an agreement with your employer, they’ll usually write it down.

Make sure the settlement agreement:

  • is in writing
  • covers the specific dispute you’re having
  • is made by a lawyer who’s independent of your employer
  • gives the name of that lawyer
  • sets out what you and your employer agree to do
  • says that the agreement meets the rules about settlement agreements

If it doesn’t meet all these conditions, it’s not valid and you don’t have to stick to it (although your employer does). This means you can still bring a claim in an employment tribunal. Contact your nearest Citizens Advice or a local solicitor if you think your agreement isn’t valid.

Your employer will usually pay for you to get independent legal advice on the agreement.

Most often it will be from a qualified lawyer, but it could also be a trade union rep or advice worker who are authorised to advise on settlement agreements.

The advice they’ll give you is limited to the terms of the agreement - for example, that you understand what you’re agreeing to. They won’t advise you on whether it’s a good agreement or if you could have got a better result by going to a tribunal.

If your employer breaks the agreement

You can go to the county court to claim breach of contract. Read more about taking your employer to court for breach of contract.

If you reached a settlement during a tribunal hearing and the tribunal put your claim on hold (‘stayed’ it) for a set period of time, you can ask the tribunal to revive your claim if your employer doesn’t fulfil their part of the agreement within that time.

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