What a settlement agreement is
A settlement agreement is a legally binding document that sets out the terms for settling an employment dispute or ending employment — typically an enhanced payment in exchange for you agreeing not to bring claims against your employer at an employment tribunal (Acas). In a redundancy, employers commonly offer one alongside an enhanced package: more money than the statutory minimum, in return for a clean, claim-free exit.
Signing one is voluntary. It is an offer, and you can negotiate it — the payment, the wording of your reference, the leaving date, what happens to your bonus or shares — or decline it and rely on your statutory rights instead.
What makes it legally valid
For a settlement agreement to be binding, Acas lists conditions that must all be met: it must be in writing; it must relate to a specific complaint or claim; you must receive advice from a relevant independent adviser (such as a qualified solicitor or a certified trade union adviser); that adviser must be insured; and the agreement must name the adviser.
The independent-advice requirement exists for your protection — you cannot validly sign away tribunal claims without it. It is common practice for the employer to contribute towards the cost of that advice, and the adviser's job is to explain what you're giving up and whether the offer is reasonable given the circumstances. If the process around the offer was flawed — no consultation, unfair selection — that materially affects what 'reasonable' looks like.
The 10-day rule and 'protected conversations'
The Acas Code of Practice on settlement agreements says a minimum of 10 calendar days should be allowed to consider the proposed formal written terms and to receive independent advice, unless the parties agree otherwise. An employer pressuring you to sign same-day is acting outside the Code — and the Code also lists improper behaviour (harassment, intimidation, or telling you you'll be dismissed if you refuse before any process has begun) that removes the legal protections these conversations normally have.
Those protections come from section 111A of the Employment Rights Act 1996: settlement discussions before termination generally can't be used as evidence in an ordinary unfair dismissal claim. But per the Acas Code, that confidentiality does not cover automatically unfair dismissal claims (whistleblowing, trade union membership, asserting a statutory right), discrimination or harassment claims, or cases involving improper behaviour. In plain terms: a badly handled 'protected conversation' is less protected than many employers think.
What to check before you sign
Check the money is right in parts, not as one number: statutory redundancy pay calculated correctly, full notice or PILON per your contract, accrued holiday, any bonus or commission earned, and the enhanced (ex gratia) element on top. Then check the tax treatment of each part — the first £30,000 of genuinely ex gratia termination pay is treated differently from notice pay, which is taxed as earnings.
Check the non-money terms with the same care: the agreed reference wording, the announcement wording, confidentiality obligations that run both ways, restrictive covenants that survive, and whether outplacement support is included. Outplacement — CV, LinkedIn and job-search help paid for by your employer — is a common component of UK settlement packages, and if it isn't offered, it costs the employer little to add. It is exactly what our redundancy support service delivers, whether your employer funds it or you do.
Sorting the paperwork is half the job. The other half is the next role.
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Sources for this page (4) — every claim above traces to one of these
- Acas — Settlement agreements
- Acas — Code of Practice on settlement agreements
- GOV.UK — Redundancy: your rights — Redundancy pay
- GOV.UK — Termination payments and tax when you leave a job
Details verified against these sources as of 2026-08-15. Employment law changes — the Employment Rights Act 2025 is rolling out through 2026 and 2027 — and your contract or your employer's own policies may give you more than the statutory minimums described here. This page is general information, not legal or tax advice: for your specific situation, use the free Acas helpline or take independent legal advice (which the law requires anyway before a settlement agreement is binding).