Harper James advises employers, founders and senior employees on settlement agreements under the laws of England and Wales. A well-drafted agreement records a negotiated exit, settles defined employment claims and gives both sides certainty about payment, confidentiality and future obligations.
Set out the termination date, salary and benefits up to termination, holiday pay, bonus treatment, notice or payment in lieu, and any severance payment. Identify whether payments are subject to deductions and separate contractual sums from compensation. The first £30,000 of a genuine termination payment generally receives favourable tax treatment, but salary, accrued holiday, bonuses, notice pay and some post-termination payments are treated differently. The payment schedule should therefore match the underlying legal entitlement.
The agreement should list the specific statutory and contractual claims being waived, rather than relying on broad wording alone. It must be in writing, relate to particular complaints or proceedings, and include confirmation that the employee received advice from an independent adviser. The adviser must be identified and insured, and the agreement must confirm that the statutory conditions have been met. Further guidance on settlement agreements can help employers and employees check the required structure before negotiations begin.
Confidentiality clauses need carefully drafted exceptions for legal and tax advice, reporting crime, co-operating with regulators and making a protected disclosure. A clause preventing all discussion of workplace concerns is not an effective substitute for a properly limited confidentiality provision. The agreement should also address the return or deletion of company property and information, garden leave, intellectual property, restrictive covenants and social media conduct where relevant.
Agree the wording and recipients of any employment reference, and state whether the employer will make an agreed announcement to staff, customers or investors. Include a clear payment deadline, the consequences of breach, legal-cost contributions and the process for signing. Digital signatures are commonly used, but each party should retain the complete signed agreement and any agreed reference or announcement.
An employer should identify the business objective first: a clean exit, protection of confidential information, resolution of a grievance or an agreed reduction in litigation risk. The employee should check whether the proposed payment reflects notice, accrued rights, loss of benefits, equity or bonus arrangements, and the claims being waived. A short timetable for advice and signature helps prevent uncertainty, while allowing enough time for meaningful independent legal advice. A carefully scoped agreement is more useful than a lengthy template that leaves tax treatment, references or continuing obligations unclear.