Settlement Agreement

A settlement agreement sets out the terms that have been agreed between an employer and employee in relation to the termination of employment. This will usually involve the employer agreeing to pay the employee some money in exchange for the employee agreeing not to bring any employment related claim against the employer. The agreement will also:

• Record the employment claims the employee is being asked to waive;
• Record the date of termination of employment;
• Record the termination payment to be made to the employee;
• Contain provisions as to the tax treatment of the termination payment, and an indemnity from the employee that they will be responsible for any tax which is due over and above what the company actually deducts;
• Contain standard provisions on return of property, confidentiality and not making derogatory statements about the company after termination;
• Contain a clause providing that the company will contribute a sum of money towards the employee’s legal fees (which the legal adviser invoices directly to the employer).