review a settlement agreement
You cannot validly sign one of these without independent legal advice, and the employer almost always pays for that advice. The question is therefore not whether to take advice but how hard to push before you sign.
The short version
A settlement agreement ends your employment and signs away your right to claim. It is only binding if an independent adviser has advised you on its terms and signed a certificate to that effect. The employer normally contributes to your legal fee, commonly between five hundred and a thousand pounds plus VAT. Up to thirty thousand pounds of a genuine compensation payment can usually be paid without tax, but notice pay cannot.
Why the law requires advice
Statutory employment rights cannot simply be contracted away. Parliament made a narrow exception for settlement agreements, and the price of that exception is that you must receive advice from a relevant independent adviser who carries insurance, and that adviser must be named in the agreement and sign a certificate. Without that, the waiver is worthless and you could still bring a claim.
That is why the employer pays. They are buying certainty, and they cannot have it unless you have been advised.
What you are giving up
Almost everything. A properly drafted agreement waives unfair dismissal, discrimination, unpaid wages, holiday pay, breach of contract and much else, usually by listing the claims individually and then adding a general sweep-up. Two things typically survive: accrued pension rights and personal injury claims you do not yet know about. Check that both are carved out.
The points worth negotiating
People sign the first draft far more often than they should. The sum offered is rarely the only thing on the table.
Tax, in plain terms
A genuine termination award, meaning compensation for the loss of the employment itself, is normally free of tax up to thirty thousand pounds. Anything that is really pay is taxable, whatever it is called in the agreement, and that includes notice pay, accrued holiday and bonus. Employers sometimes present the whole figure as though it were tax free. Ask for the split in writing before you sign.
Protected conversations and without prejudice
An employer may open a settlement discussion on a confidential basis, and in most cases neither side can later refer to it at a tribunal. This is why the conversation often comes out of nowhere and why it feels like an ambush. It does not mean you must respond on the spot. You are entitled to take the papers away and take advice.
What to do now
- Do not sign anything at the meeting.
- Ask for the draft agreement and the proposed fee contribution in writing.
- Ask for a breakdown showing which parts are taxable.
- Take advice before the employer’s deadline, and treat that deadline as negotiable, because it usually is.
A note on this page
This is general information about how the law works in Scotland. It is not advice about your situation and it cannot be, because we do not know your circumstances. Nothing here should be relied on as a substitute for speaking to a solicitor about your own case.
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