Settlement agreements for employers: a clear process and independent advice for your employees

A settlement agreement protects your business only if it meets the legal conditions, and one of them is that the employee has received independent legal advice. Follow the Acas Code, give the employee time, offer a reasonable contribution to their legal fees and make it easy for them to find an adviser. Agreements then get signed quickly and the protection holds.

This guide is for employers and HR teams in England and Wales.

What makes a settlement agreement binding

Under section 203 of the Employment Rights Act 1996 (and section 147 of the Equality Act 2010 for discrimination claims), an agreement waives statutory claims only if:

• it is in writing;
• it relates to particular complaints or proceedings;
• the employee has received advice from a relevant independent adviser on its terms and effect, including its effect on their ability to bring a tribunal claim;
• the adviser is covered by insurance or professional indemnity;
• the agreement identifies the adviser; and
• the agreement states that these conditions are met.

If any condition is missing, the employee may still be able to bring the claims you thought were settled. Acas also advises listing the particular claims, rather than relying on a general "full and final settlement" phrase.

Protected conversations

Section 111A of the Employment Rights Act 1996 allows you to propose a settlement in a "pre-termination negotiation", and in an ordinary unfair dismissal claim that conversation cannot usually be used in evidence. The Acas Code explains its limits:

• it does not apply to automatically unfair dismissal claims, such as whistleblowing, or to discrimination claims, where the common law "without prejudice" rule may or may not apply;
• it is lost where there is improper behaviour, such as harassment, bullying or undue pressure; and
• it is good practice to allow the employee to be accompanied at a meeting to discuss the offer.

Give the employee time

The Acas Code says a minimum of 10 calendar days should usually be allowed to consider the proposed terms and take advice, unless the parties agree otherwise. Very short deadlines risk an allegation of undue pressure and usually slow things down.

The legal fee contribution

Almost every settlement agreement includes a contribution to the employee's legal fees, because you need the employee to be advised. Practical points:

• State a fixed sum in the agreement, paid directly to the adviser on receipt of an invoice. Paid that way, it is not taxable for the employee (section 413A, Income Tax (Earnings and Pensions) Act 2003).
• Make it realistic. A contribution that does not cover a proper review leads to delay, negotiation or an unsigned agreement.
• Say whether it is payable if the agreement is not signed. This avoids disputes later.

Arranging independent advice for your employees

During a restructuring or redundancy programme, the slowest step is often employees finding an adviser. You can help by giving employees the details of a solicitor who handles settlement agreement advice, while making clear they are free to choose their own.

If your employees instruct me:

• I act only for the employee. I do not advise you on the same matter, and I do not report the employee's advice to you.
• Each employee is a separate matter, with its own conflict check.
• The advice is given online, so it works for employees anywhere in England and Wales, including remote and hybrid staff.
• I confirm my name, qualification and insurance details for the adviser's certificate.
• My fee for a standard review is £1,050, and most cases are completed within that budget. I invoice you under the legal fee clause. If your contribution is lower, I will ask you to consider increasing it before the employee is asked to pay any difference. I am not VAT-registered, so no VAT is added.
• I aim to advise within 2 to 3 working days of receiving the documents.

Redundancy programmes: points to get right

• Collective consultation is needed where you propose 20 or more redundancies at one establishment within 90 days: at least 30 days before the first dismissal, or 45 days for 100 or more. The maximum protective award for failing to consult doubled on 6 April 2026. A change scheduled for April 2027 would also count redundancies across the whole organisation.
• Statutory redundancy pay is calculated with a weekly pay cap of £751 for redundancies on or after 6 April 2026. It should not be made conditional on signing a settlement agreement.
• Unfair dismissal qualifying period is scheduled to fall to six months, and the compensatory award cap to be removed, from 1 January 2027. Plan for the position at the date of dismissal.
• Tribunal time limits increased to six months on 1 October 2026, so unresolved exits now carry risk for longer.

Advice for your business

I also advise employers on exits and settlement agreements, including preparing for protected conversations and drafting agreements, in matters where I am not advising the employee. Every instruction starts with a conflict check.

Next step

To discuss an exit or to arrange independent advice for employees, contact me through the enquiry form or at info@sadikbugra.com. See also the settlement agreement service page and who pays for settlement agreement advice.