Yes. For a settlement agreement to be legally binding, you must receive independent legal advice from a qualified adviser. Our solicitors will explain the terms of the agreement, advise you on the rights you are being asked to waive, and identify whether there may be scope to negotiate a better outcome.

At Magara Law, we not only review the agreement itself but also consider the wider circumstances of your employment to ensure you can make a fully informed decision before signing.

Employers will often contribute towards, or fully cover, the cost of the independent legal advice required for a settlement agreement to become legally binding. The amount offered varies from employer to employer and is usually set out in the agreement itself.

At Magara Law, we cap our fees at the employer’s contribution wherever possible. This means that, in most cases, clients can receive legal advice on the terms without having to make any additional payment themselves.

This is often possible. We have successfully negotiated improved settlement packages for many clients, including increased compensation, enhanced references, amendments to restrictive covenants and more favourable confidentiality provisions.

There is no fixed amount that an employee should receive.

A reasonable settlement will depend on factors including your salary, length of service, notice entitlement, accrued holiday, bonus or commission, redundancy entitlement, the circumstances surrounding your departure and whether you may have potential employment claims. 

For example, an employee with evidence of unfair dismissal, discrimination or whistleblowing may approach settlement differently from someone whose employer is simply offering an enhanced payment for an agreed exit.

We can assess the circumstances leading to the offer and advise whether the proposed financial package is reasonable. 

A reasonable offer should be assessed by separating what you are already entitled to receive from the additional compensation being offered to settle your employment rights. 

Your contractual notice, accrued holiday and other existing entitlements should not ordinarily be treated as compensation for giving up potential claims.

The additional settlement payment should be considered against matters such as the reason for your departure, the strength and value of any potential claims, your salary and length of service, and how long it may take you to secure comparable employment. 

This means two employees earning the same salary could reasonably receive very different settlement offers. 

Not automatically. The tax treatment depends on what each payment under the settlement agreement represents. 

Salary, holiday pay, bonuses and payments in lieu of notice will generally be subject to tax and National Insurance in the usual way.

A genuine termination payment may qualify for the £30,000 income tax exemption, depending on the circumstances. 

Your settlement agreement should therefore clearly distinguish between the different payments being made and their proposed tax treatment. 

No. A settlement agreement is a voluntary agreement between you and your employer. Before deciding whether to sign, it is important to understand the rights you would be waiving by signing and whether the terms are fair.

At Magara Law, we review settlement agreements, explain them in plain English and advise on whether there may be scope to negotiate a better outcome.

Your notice entitlement should be considered separately from any additional compensation being offered for agreeing to terminate your employment. 

Depending on your contract and the proposed arrangements, you may work your notice, be placed on garden leave or receive a payment in lieu of notice.

Notice payments will generally be taxable. 

When considering whether an offer is reasonable, it is important not to treat money you were already contractually entitled to receive as though it were additional compensation for agreeing to leave. 

Settlement agreements usually require employees to waive specified claims against their employer and, in some cases, other individuals or associated companies. 

Depending on your circumstances, these can include claims for unfair dismissal, discrimination, whistleblowing detriment, breach of contract and unlawful deductions from wages. 

Before signing, your solicitor should therefore understand the circumstances surrounding your employment and proposed departure sufficiently to advise you about the rights and potential claims you are being asked to give up.

There is no universal statutory period applying to every settlement agreement.

However, the Acas Code of Practice recommends that employees should, as a general rule, be given at least 10 calendar days to consider the formal written terms and obtain independent advice, unless the parties agree otherwise. 

If your employer has imposed a shorter deadline, that does not mean you should sign before you understand the agreement.

We can advise you on the proposed deadline and, where appropriate, seek additional time. 

Yes. An agreed employment reference can form an important part of a settlement agreement, particularly where the employment relationship has become difficult or there is disagreement about the circumstances of your departure. 

The wording of the reference can be agreed and attached to the settlement agreement.

The agreement can also address how future reference requests will be handled and, where appropriate, what your employer will say internally or externally about your departure. 

These entitlements require careful consideration because they may be governed by your employment contract, separate bonus or commission arrangements, or share and incentive scheme rules. 

Issues can arise where a bonus is due after your termination date, commission has been earned but not yet paid, or share options and LTIPs depend upon whether you are treated as a “good leaver”.

For senior employees in particular, these rights can represent a significant part of the overall value of an exit. 

We can consider the relevant provisions alongside the settlement agreement before advising you on the proposed terms.

Yes. A settlement agreement may preserve restrictions already contained in your employment contract or, in some cases, seek to introduce new restrictions. 

These can affect your ability to compete with your former employer, approach clients, deal with customers or recruit former colleagues after leaving.

It is therefore important to understand precisely which restrictions will continue to apply and for how long. 

Restrictive covenants can also be a point for negotiation, particularly where your employer is seeking restrictions that go beyond your existing contractual obligations. 

A protected conversation commonly refers to a discussion under section 111A of the Employment Rights Act 1996 in which an employer and employee discuss ending employment on agreed terms. 

In certain circumstances, those discussions cannot be relied upon in an ordinary unfair dismissal claim.

However, the protection has important limitations.

It does not automatically make everything said during a settlement discussion confidential or inadmissible, and different considerations can arise in claims involving matters such as discrimination or whistleblowing. 

If you are concerned about how a settlement agreement was proposed, what was said during the discussions or pressure placed upon you to accept an offer, those circumstances should be considered as part of the advice you receive.