Settlement Agreements were known as Compromise Agreements up to July 2013.
A Settlement Agreement is a severance agreement offering a financial incentive when a contract of employment is terminated, to void an employee bringing a claim against their employer.
It is important to understand that a Settlement Agreement is a legally binding agreement, following the termination of employment.
An employee will be offered severance payment by an employer – and in some cases, there may be other incentives such as shares included in the deal.
There may also be compensation in a Settlement Agreement in lieu of notice of termination of employment.
The purpose of an employer offering a Settlement Agreement is to avoid any claim the employee may have, which might be taken to an Employment Tribunal – because of this employees must seek expert legal advice as soon as possible and before accepting a Settlement Agreement.