Top Tips For Settlement Agreement Negotiations

Posted on 18/03/2021 under General, Redundancy,
Last updated 08/11/2026

Whatever you are negotiating, two things are worth keeping in mind:

1. In any negotiations, be they at the start of employment, during pay rise considerations, or in a Settlement Agreement, chances are that you are being offered the minimum your employer believes they can get away with, and
2. You can negotiate better terms/salary/financial settlement.

If you have been offered a Settlement Agreement by your employer, there are several things you can do to strengthen your bargaining position and achieve more favourable terms.

Before you start, use our free settlement agreement calculator to estimate how much compensation you could get, so you know how far the first offer is from what you could ask for.

Instruct an experienced Settlement Agreement Solicitor

The first and most important step you can take to successfully negotiate a Settlement Agreement is to instruct a Settlement Agreement Solicitor.  Legally, a Settlement Agreement only stops you bringing Employment Tribunal claims if you have had independent advice on its terms and effect from a relevant independent adviser, such as a Solicitor (Employment Rights Act 1996, section 203).  Your Settlement Agreement lawyer will carefully look over the terms of the agreement and evaluate the strengths and weaknesses of you and your employer’s position.  Because of their experience in negotiating Settlement Agreements related to many industries and professions, they will know what to ask for and how to negotiate on your behalf.

Employers usually make a contribution towards your legal fees.  They do not have to, but Acas says they should consider offering to pay for independent advice.

Do not let anyone rush you.  The Acas Code of Practice on settlement agreements recommends you are given at least 10 calendar days to consider the terms, unless you agree otherwise.  What is said about an offer at an ‘off the record’ meeting usually cannot be used as evidence in an ordinary unfair dismissal claim (section 111A), but that protection does not cover claims such as discrimination, and your employer loses it if they behave improperly, for example by putting undue pressure on you.

Do not resign

Being involved in a dispute with your employer is one of life’s most stressful events.  It can be tempting to resign to get away from your job and your employer to protect your mental health.  However, there are a few reasons why resigning is a bad idea:

• Resigning and claiming constructive dismissal is only possible if your employer has seriously breached your contract and you resign in response (section 95), and these claims can be hard to prove.  You also need two years’ service to claim ordinary unfair dismissal.  That falls to six months where your employment ends on or after 1 January 2027, even if you were given notice before then (SI 2026/559).
• For your employer, the main advantage of a Settlement Agreement is avoiding an Employment Tribunal claim. Leaving your job before signing an agreement removes much of the need for the employer to be generous, or even reasonable. 
• The compensation element of a Settlement Agreement is designed to ensure you have enough money to live on whilst you are looking for a new position. If you already have a job to go to, any claim for lost earnings could be worth a lot less.
• Employment Tribunal judgments are published online, which is one reason both sides often prefer a confidential settlement. Settlement Agreements usually contain a confidentiality clause which protects both you and your employer.  It cannot stop you blowing the whistle (section 43J), and for agreements made on or after 1 October 2025 it cannot stop a victim of crime talking about it to people such as the police or a lawyer (Victims and Prisoners Act 2024, section 17).  Furthermore, as part of negotiations, you can ask your employer to provide a positive reference.  Employers do not usually have to give one, so agree the wording in the agreement.

Understand your employer’s WIFM

In any negotiation, it is vital to understand the other side’s ‘What’s In It For Me?’ (WIFM).  Normally an employer will offer a Settlement Agreement because they want to swiftly end their employment relationship with you and avoid the cost, time, and potential reputational damage that may occur if you bring a claim in the Employment Tribunal.  That risk grows in 2027: where your employment ends on or after 1 January 2027, the cap on the unfair dismissal compensatory award is removed (SI 2026/559).  Agreeing to a confidentiality clause and ensuring the transition period between you and your successor’s employment runs smoothly are just two ways you can increase your negotiating position.  A Settlement Agreement Solicitor will quickly establish what is important to your employer and aim for a win/win solution.

If your employer is dragging their heels, consider raising a formal grievance

Unfortunately, your employer may be more motivated to get rid of a ‘problem’ than reward you for many years of exceptional work.  If you need to encourage your employer to the negotiating table, raising a formal grievance may result in them fast-tracking a Settlement Agreement, which is quicker and less stressful to generate than the grievance process. 

Raising a formal grievance also allows you to test the strengths and weaknesses of your employer’s stance, providing the information you and your Settlement Agreement lawyer can use to bolster your negotiating position.  Only raise a grievance about a genuine complaint.  Your employer is expected to deal with it under the Acas Code of Practice on disciplinary and grievance procedures, and if they unreasonably fail to, a tribunal can increase an award by up to 25%.

Time limits keep running while you wait.  Where your employment ends on or after 1 October 2026, the time limit for most tribunal claims is six months less one day (SI 2026/954), and you have to contact Acas for early conciliation before you can make a claim.

Concluding comments

A good Settlement Agreement is one that provides you with enough compensation to comfortably live until you secure another job and protects your professional reputation.  Compensation for losing your job can usually be paid tax-free up to £30,000 (section 403 ITEPA 2003), but notice pay is taxed as earnings whether you work your notice or are paid in lieu (section 402B).  By working with a specialist Settlement Agreement Solicitor, you could improve your chances of negotiating terms that best protect your interests.

Have more questions about settlement agreements and redundancy? Call Settlement Agreement Solicitors today on 0800 368 6162 or fill in your details below to request a callback.