Free compromise agreement helpline

We offer a free compromise agreement helpline to employees

If you have been offered, or think you are about to be offered, an employment compromise agreement then our expert lawyers are here to help.

We operate nationally and our free compromise agreement helpline can be contacted by either phone on freephone 0808 139 1589 or by email.

We have a team of qualified solicitors who are experienced in advising employees on the terms of employment settlement agreements, and they are always happy to answer any preliminary queries that you may have.

If you wish to appoint us to act on your behalf in dealing with your settlement agreement then in most cases you will not need to pay for our advisory service. This is because it is conventional for employers to make a contribution to the employee’s legal costs and where that is the case then it is our policy to limit our charges to the amount offered. This means that in the overwhelming majority of cases our service is effectively free to employees.

When you are offered a settlement agreement your employer will normally confirm that they will pay for you to seek independent legal advice, and will confirm how much they are willing to contribute. However, where this point is not addressed then our lawyers will be happy to contact the employer to obtain clarification.

When you decide to appoint us to deal with your compromise agreement the process is very simple. All you need to do is to send us the settlement agreement itself, along with any recent correspondence with your employer. We will then arrange a convenient time to discuss the matter with you, either on the telephone, or by video link if you prefer.

Once the terms of the agreement have been explained and you are happy with the agreement, then the legal formalities can be finalised. If you need time to go back to your employer to renegotiate any aspect of the agreement such as the level of compensation or the wording of your reference then that will be fine. If you would like us to undertake negotiations on your behalf then we would be happy to do so, but that might incur a fee, so that is something we would discuss with you at the time.

You can call our free compromise agreement helpline on freephone 0808 139 1589. Alternatively you can email your query to us at [email protected] and a member of our team will get back to you straight away. 


Tax and Settlement Agreements

Tax and Settlement Agreements : Why it is important to take expert legal advice.

When a Settlement Agreement is entered into an employee can agree to waive their rights to bring a legal claim in return for a sum of compensation. Up to £30,000 paid as compensation under a Settlement Agreement can be tax free.  

But not all payments made under a Settlement Agreement are tax free. The Settlement Agreement must therefore make it very clear how the payment to the employee is calculated and which elements are taxable/non taxable. 

Furthermore, although the employer will pay the tax, the employee could be legally liable for any excess tax.

It is therefore important that you receive expert legal advice when entering into a Settlement Agreement.

Our fees will be paid by your employer so financial considerations should not prevent you from getting the best possible legal advice. Our solicitors are experts in Tax and Settlement Agreements. They will scrutinise the Settlement Agreement and ensure that correct amount of tax payable by the employer is identified so that you are not faced with any nasty surprises.

The £30,000 Tax Free Sum

In addition to compensation, redundancy payments are included within the £30,000 exemption.

Legal costs will not be taxable or count towards the £30,000 exemption, provided they relate to the termination and are paid direct to the employee’s solicitor under the terms of the Settlement Agreement. 

Payments that are not included in the Settlement Agreement Tax Free Sum

Here are examples of some payments that are commonly made following the termination of employment which may not be tax free:

  • Salary and employment benefits

Any payment relating to salary or employment benefits acruing before the employment contract ended will be taxable.

  • Payments in lieu of holiday or notice

Any Payment that is made in lieu of holiday or notice will be subject to tax and National Insurance.

  • Payments for ‘injury to feelings’

While any payment that is made to compensate for ‘injury to feelings’ relating to unlawful discrimination taking place prior to the employment being terminated is not taxable, if the injury to feelings was caused by the termination itself then the compensation will be subject to tax.

  • Payments for restrictive covenants or a confidentiality clause

Any payment made in respect of a restrictive covenant or a confidentiality clause in the Settlement Agreement will be subject to tax and NI.

For further information about Tax and Settlement Agreements give us a call or email us at [email protected]


Settlement agreements and references

We are often asked about Settlement agreements and references.

Employers are not usually under any legal obligation to provide a former employee with a reference, though thet must provide one if there was a written agreement to do so.

If an employer does agree to provide a reference then the employer must be satisfied that the reference is true, accurate and fair. If an employer provides a reference that is untrue or inaccurate then they can be sued for ‘negligent misstatement’, so it is important that they do not leave themselves open to a legal action of that kind.

You may be able to challenge a reference which you believe is unfair or misleading. 

Most settlement agreements will address the issue of a reference.

You may have already worked out the wording of an agreed reference with your employer, in which case that wording can be included in the settlement agreement. The employer must then provide that reference to any future employer.

If the wording of the reference has not already been drafted and agreed then we will be happy to raise this issue with your employer and act on your behalf in agreeing a reference that can be included in the settlement agreement.

Many employers have a policy of only providing a short, basic reference. This would generally be limited to confirming the dates that you worked for them and your job title. Within the negotiations that accompany a settlement agreement employers can be asked to provide a more detailed reference.

Employees often feel that a basic reference suggests that their performance was substandard, but because so may employers now only give basic references it will not look unusual.

If you have been offered a settlement agreement and have any questions about settlement agreements and references then our solicitors are here to help. Most employers will make a contribution to the legal costs of taking legal advice on a settlement agreement, and where that contribution is a reasonable one we will limit our fees to the amount being offered; which means that it will not cost you anything.

To discuss settlement agreements and references please call our free legal helpline or send an email to us at [email protected]

Compensation for Employees Paid by Commission Following ECJ Holiday Pay Decision

We look at a new holiday pay ruling in Lock v British Gas Trading Ltd ECJ 22.5.14 (C-539/12), and predict a flurry of claims for compensation for employees paid by commission.

Lock v British Gas Trading Ltd is a new  decision from the European Court of Justice (ECJ) on holiday pay which is expected to have widespread repercussions for people who work on a commission basis and their employers.  Employers who have paid holiday pay at the basic rate (ie without  commission) to employees for whom commission is an intrinsic part of their pay package now face compensation claims for backdated holiday pay.

The court ruled that a worker’s right to paid annual leave under the EU Working Time Directive was infringed when his future remuneration was reduced because he had been unable to generate commission while on holiday.  This represented a deferred financial disadvantage that was capable of deterring workers from taking annual leave, contrary to the purpose of the Directive.  The commission payments were directly and intrinsically linked to the claimant’s work and so formed part of his normal remuneration.  Accordingly, he was entitled to receive additional sums in respect of annual leave representing commission he would have earned had he not taken that leave, the method of calculation being for the national court to assess.

The implications of this decision are still being considered but it seems certain that it will cost British employers many millions of pounds in compensation for backdated pay.

If you have been employed on a commission basis and think you may be eligible for backdated holiday pay compensation then call us now on 0808 139 1606 or email [email protected] for a free, no obligation chat and details of our No Win-No Fee funding scheme.

The risks of imprecise wording in settlement agreements

Wording in settlement agreements: Solicitor Emma Napper explains why it is so important that correct and precise wording is used in a settlement agreement

In a case in the Technology and Construction Court of the High Court (Jacobs UK Ltd v Skidmore Owings & Merrill LLP) the court had to consider the meaning of a settlement agreement that had been reached between the parties that settled their earlier litigation.

There is a warning to all who enter into Settlement Agreements, whether they be, as in this case, commercially based litigation or the more humble employment settlement agreement, of the imperative need to ensure that the terms of any such agreements are clear and comprehensive. If the wording of the Settlement Agreement is imprecise or unclear there is a real risk of the agreement causing further disputes and even litigation in the future.

The facts of the case are not of major interest for this article, save to say that the argument revolved around whether the agreement to “award” a certain number of hours of work could be satisfied by “offering” the work, even if the offer was not taken up.

The court concluded that the “award” of a contract could not be equated to the mere “offer” of a contract. Unless contracts had actually been entered into by the parties, the claimant was entitled to claim its loss.

The judge pointed out that more specific and precise wording of the Settlement Agreement, which could have directly addressed the need for concluded contracts to be entered into, would have left no room for argument. A failure to be precise in the wording of the Settlement Agreement is likely to mean that, while both sides may be on reasonably friendly terms at the time of entering into the settlement, at a later date, litigation could well be the (expensive) result.

If you are an employee and have been offered a Settlement Agreement then our fees for advising on the terms of the compromise will generally be paid by the employer.

For further guidance on the risks of imprecise wording in settlement agreements or for a free assessment of your case, contact us at [email protected] or give us a ring on 0808 139 1589

Settlement Agreements under the Equality Act 2010

Settlement Agreement Solicitor, Emma Napper, on an Amendment to the Act that clarifies the definition of ‘Independent Adviser’.

For the past year or so, academics and lawyers have been having a wonderfully esoteric argument over the concern that there are ambiguities in the Equality Act 2010. It was feared that this could have had far-reaching implications for the use of Settlement Agreements between employers and employees.

Section 147 of the Equality Act sets out the requirements needed to have a qualifying Settlement Agreement to settle claims arising under the Act. One of these is that the employee must receive advice from an “independent adviser” about its terms and effect. However, this, it was argued by some, could mean that an employment solicitor who was instructed by the employee prior to the production of the final Settlement Agreement could not, as a result, be described as truly “independent”. This would have meant that the solicitor would therefore be precluded from advising on the Settlement Agreement any further. Two top employment law QCs couldn’t agree on whether there was a problem and the Law Society was forced to issue a warning to solicitors, although the Department for Business insisted there wasn’t any problem.

Those who were exercised by this academic argument can now rest easy (or at least they can after 6 April, when it comes into force) because the Government has produced the Equality Act 2010 (Amendment) Order 2012, which amends section 147 (the offending clause) of the Equality Act. The definition of an ‘Independent Adviser” for the purposes of completing a Settlement Agreement has been adjusted to remove the anomaly.

For all the furore on this subject in a section of academia, I am not aware of any Settlement Agreements that have been completed in the time since the Equality Act came into force being held to be unenforceable because of this rather poor piece of drafting but, no doubt, somebody would have tried, if this amendment hadn’t been produced. It was a case, really, of not a lot of fuss about very little, but it kept some journalists and academics in work in these difficult times!

Emma Napper advises on Settlement Agreements. If you would like specialist advice on a Settlement Agreement then call her on 0808 155 6389 or email her on [email protected]

Why is there usually a Tax Indemnity in a Settlement Agreement?

A Specialist Settlement Agreement solicitor looks at why most Settlement Agreements contain a tax indemnity clause

The first £30,000 of an employment termination payment is usually exempt from tax, but any excess will be subject to income tax in the normal way. Any statutory redundancy payment or ex gratia payment will also probably be tax free.

The tax treatment of pay in lieu of notice (“PILON”) will depend on whether it is a right conferred by the employment contract, either expressly or impliedly. If so, it will be taxable as “earnings” in the normal way. However if there is no contractual right to the PILON then it should be exempt from tax, provided that the total termination payment does not exceed £30,000. Any payments which are allocated to restrictive covenants or confidentiality obligations will be taxable in full.

A Settlement Agreement will usually include a ‘tax indemnity’ clause. This provides that if additional tax is payable, it will be the liability of the employee rather than the employer. Neither the employer nor the employee can make guarantees about the tax status of any payments and Her Majesties Revenue and Customs (“HMRC”) reserves the right to look into any transactions and to decide whether or not tax should be applied. If HMRC do decide to tax, the employer is liable to pay the tax, which is why the indemnity clause is included in most Settlement Agreements. When such a clause is included it is helpful to the employee for there to be an additional clause in the Settlement Agreement to allow the employee (at his own expense) to raise objections with HMRC before a payment is made by the employer.

We are happy to answer any queries you may have in relation to Settlement Agreements without charge or obligation – You can email us at [email protected]

How Far can an Indemnity in a Settlement Agreement be Expected to go?

A specialist Settlement Agreement Solicitor examines the effectiveness of an indemnity in a Settlement Agreement.

In the case of Coulson v Newsgroup Newspapers in the high court a judge placed a limit on the effect of an indemnity in a Settlement Agreement.

Andy Coulson was employed as Editor of the News of the World between 2003 and 2007 (he later went on to become David Cameron’s press secretary at 10 Downing Street).  The Settlement Agreement he entered into at the termination of his employment contained a clause allowing for re-imbursement of legal expenses “which arise from his having to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings as a result of his having been Editor of the News of the World”.

Coulson was subsequently arrested in connection with allegations of intercepting communications and making unlawful payments to police officers.  He denied the allegations and was not eventually charged with any offence.

He then sought to claim payment of his legal costs under the terms of the indemnity in the Settlement Agreement.  Newsgroup refused to pay on the basis that the indemnity did not cover legal costs associated with the defence of criminal charges.  Coulson applied to the court for a declaration as to the effect of the clause in the Settlement Agreement.

The judge decided that although the indemnity was wide ranging, seeking to protect Coulson from legal expenses arising from the “ordinary occupational hazards” of being an Editor, the provision in the Settlement Agreement did not cover criminal allegations made against Coulson personally.

The judge went further by saying that, even if he was wrong in deciding as he had, as no “judicial or quasi-judicial proceedings” had actually been commenced, the expenses would not have been covered anyway.

For advice on the effect of specific terms contained in a Settlement Agreement contact specialist solicitor, Emma Napper. You can email her at [email protected]

Settlement Agreements – Scottish Law and English Law Similarities.

Solicitor Lee Dawkins takes a look at an unusual aspect of the law governing Settlement Agreements north and south of the border.

In most instances a solicitor who is qualified to practice in England and Wales cannot practice in Scotland. A Scottish qualified solicitor is similarly restricted to practicing north of the border.

The Scottish legal jurisdiction is completely separate from the England and Wales legal system and, generally speaking, in the world of litigation never the twain shall meet.

However, there is the odd exception when English and Welsh and Scottish law all converge and one such area is Settlement Agreements and employment law generally.

So, whilst we, as English solicitors, would not normally be able to advise someone in Scotland, we can do so when it comes to Settlement Agreements and Settlement Agreement law. Likewise, if we advise a person with a Settlement Agreement that they would be better off taking their employer to an Employment Tribunal, as English solicitors, we are both able and willing to bring claims in Scottish Employment Tribunals.

The law governing Settlement Agreements is uniform throughout the whole of Britain. This means that wherever you are in the country we can assist you with your Settlement Agreement query. The only exception to this is Northern Ireland where the situation is slightly different and we would therefore recommend that you locate a specialist Settlement Agreement solicitor in Northern Ireland itself.

For further details of the Settlement Agreement legal service we offer give us a call on 0808 139 1589 or email solicitor Lee Dawkins at [email protected].

Enhanced Redundancy Packages and Settlement Agreements

Sam Hannon reviews the decision in Geoffrey Garatt v Mirror Group Newspapers Limited 2011 and assesses its impact on the use of Settlement Agreements

In an important judicial decision it has been confirmed that terms which require a Settlement Agreement to be signed in order for an employee to benefit from an enhanced redundancy package do not need to be expressly incorporated in an employment contract – they can be implied.

The decision in Geoffrey Garatt –v- Mirror Group Newspapers Limited 2011 could be useful to employers in persuading an otherwise reluctant employee to sign a Settlement Agreement to guarantee their enhanced redundancy package. Employers are often keen to achieve a clean break on redundancy and the use of Settlement Agreements is a very effective way of achieving this.

For further information about the Garatt case in particular or Settlement Agreements generally, contact Sam Hannon by phone or email at [email protected]

Settlement Agreements and Legal Advice

We review a decision which highlights the importance of obtaining the best possible legal advice before signing a Settlement Agreement.

For a Settlement Agreement to be binding, there are a number of legal formalities that must be followed. These formalities include a requirement that the employee obtains independent, professional advice as to the ‘terms and effect’ of the proposed Settlement Agreement from a specialist with adequate professional indemnity insurance.

The conditions are strictly applied, so if any one of the formalities is not satisfied the agreement is not binding. It was this strict application that the claimants in McWilliams v Glasgow relied on in an attempt to have their Settlement Agreements set aside.

The case involved a group settlement of equal pay claims in Glasgow. Legal advice was provided in group sessions with PowerPoint presentations. Details of the Settlement Agreement were contained in an information pack. Solicitors explained what each clause of the agreement meant, but the Claimants were not told whether the deal on offer was a good one for them personally. They subsequently argued that they had not been advised on the ‘terms and effect’ of the Settlement Agreement and that the agreements were not binding.

The EAT disagreed with the claimants. It was satisfied that the procedures had been complied with and that the Settlement Agreements were therefore binding. Advice on the ‘terms and effect’ of the proposed Settlement Agreement does not require the independent adviser offer an opinion on whether the deal is a good one. The construction of the legislation should facilitate the practical operation of Settlement Agreements, bearing in mind the public policy requirement that the settlement of employment disputes was to be encouraged.

The case confirms that only a basic level of legal advice needs to be given by the independent legal adviser for a Settlement Agreement to be binding. The advisor does not have to consider whether the agreement is a good deal for the employee or whether the employee has a claim worth pursuing. So, if you are invited to enter into a Settlement Agreement it is important that you consult a specialist legal advisor who is able to offer guidance on whether the deal is right for you before signing on the dotted line. If you don’t do so, it will be too late.

For legal advice before signing a Settlement Agreement email solicitor Emma Napper at [email protected]

Government’s Aim to Free Businesses from Red Tape Set to Impact on Employment Law

We assess what the reforms are likely to mean for employment law and Settlement Agreements

The Business Secretary, has announced a range of measures to reduce the amount of red tape faced by business. One side effect of this is the significant impact it’s likely to have on employment decisions.

The reforms include repealing the Regulations extending the right to request flexible working to the parents of 17 year olds, and introducing a moratorium on new regulation for small businesses. The Government believes that the reforms will remove barriers to growth but employment lawyers worry that it could also lead to greater insecurity in the workplace.

In September 2010, the Government announced that the right to request flexible working would be extended to parents of children under 18 years old The change was due to be implemented in April 2011. At the time the Government believed that the extension would benefit 288,000 employees and make it simpler for employers to identify whether an employee was eligible to make a request However, the Government’s recent announcement means that the Flexible Working Regulations 2010 will be now repealed and the right to request flexible working will only be available to parents of children aged under 17, disabled children under 18 and carers of certain adults.

The Government will also introduce a moratorium exempting businesses with fewer than ten employees, and genuine start-ups, from new domestic regulation for three years. As a result, these businesses will be exempt if the Government does create a new flexible system of shared parental leave, or extends the right to request flexible working for all employees – measures it will consult on later this year. The Government has also confirmed that the right to request time off to train will not now be extended to businesses employing fewer than 250 people.

The changes will be accompanied by a public audit of almost 22,000 existing statutory instruments. The legislation will be grouped into themes on a dedicated website and businesses will be asked to tell the Government what they think of those regulations and how the system could be improved. Any overly burdensome or unnecessary regulations will be removed unless Government departments can prove there is a good reason for them.

These measures are not likely to directly affect the rules governing Settlement Agreements, but with everything up for debate there could yet be implications for Settlement Agreements. We will be monitoring developments closely and reporting back, especially if the reforms change the way in which Settlement Agreements operate in the UK.

If you would like specialist advice on a Settlement Agreement then call us on 0808 155 6389 or email us at [email protected]

Reform of the Employment Tribunal System

The government plans to consult on proposals to reform the Employment Tribunal system and qualifying periods for unfair dismissal. The proposals include:

  • sending all unfair dismissal claims to ACAS to attempt conciliation before they reach a tribunal;
  • all unfair dismissal cases to be heard by a single judge rather than a panel of three;
  • the introduction of a fee to file any tribunal claim (the TUC claims this could be as high as £500);
  • extending the qualifying period to bring a claim for unfair dismissal from one year to two.

The Government claims that the proposed changes to employment law will ‘ensure maximum flexibility while protecting fairness and providing the competitive environment required for enterprise and growth’. The two most controversial of these are the increased qualifying period for unfair dismissal claims and the introduction of a fee to file a claim. The Government thinks that such a move will enable businesses to ‘feel more confident about hiring people’ and create ‘more time for the relationship to get established and work well’, not become ‘a charter for businesses to sack people unfairly’. It estimates that the increase will result in between 3,700-4,700 fewer unfair dismissal claims per year. Quite what effect the introduction of a fee will have is unknown. Although the qualifying period has previously been as long as two years, there has never been any question of fees being payable to bring a claim. This could open the door to claims that costs should routinely be awarded to successful claimants, as is the case in the civil courts.

The other proposals include:

  • requiring all claims to be submitted to Acas before a claim is issued, to allow Acas a period of up to a month to offer pre-claim conciliation.
  • introducing automatic financial penalties for employers found to have breached employment rights, on top of the ordinary compensation already payable. The penalty would generally be half the amount of the total award made to the claimant, and would be payable to the Government
  • allowing employment judges to sit alone in a wider variety of cases.
  • reviewing the formula for calculating employment tribunal awards and statutory redundancy payment limits.

The Government has also published the ‘Employers’ Charter’, which sets out in clear terms what employers can and can’t do when managing staff.