Being offered a settlement agreement in the UK can be stressful, especially with a short deadline. A clear checklist helps you spot issues quickly before you sign away important rights.
1. Check the basic details
- Are your full name, job title and employer’s details correct?
- Is the termination date accurate and does it reflect what has been agreed?
- Does the agreement state whether you will work your notice, be on garden leave or receive a payment in lieu?
- Any mistake here can cause problems with payroll, references and future employment records.
2. Review all payments and benefits
- Go through every figure carefully:
- Outstanding salary and expenses
- Notice pay or payment in lieu of notice
- Accrued but untaken holiday pay
- Redundancy pay (statutory and any enhanced scheme)
- Bonus, commission, share options or LTIP treatment
- Ex‑gratia compensation for loss of employment
- Check how and when payments will be made and whether they are subject to tax and National Insurance. Make sure that the wording matches what has been told to you verbally.
3. Understand the tax wording
Most agreements split payments between taxable earnings and termination payments. Look for:
- Which amounts will be taxed through PAYE
- Whether any part of the compensation is intended to fall within the £30,000 tax‑free exemption
- Any tax indemnity clauses requiring you to reimburse the employer if HMRC disagrees
- If the tax position is unclear, ask your solicitor to explain the risks.
4. Look closely at non‑financial terms
- Important clauses often include:
- Confidentiality and non‑disparagement
- Agreed reference and announcement wording
- Return of property and deletion of data
- Intellectual property and confidentiality reminders
- Internal statements about performance or conduct
A well‑drafted reference and announcement can be as valuable as money when you apply for your next role.
5. Review restrictive covenants
Your contract may contain clauses restricting working for competitors, soliciting clients or poaching staff. The settlement agreement might:
- Re‑state existing restrictions
- Introduce new or tighter restrictions
- Relax or waive some restrictions
- Make sure you understand what you can and cannot do after leaving, especially if you work in a specialist sector.
6. Check warranties, waivers and warranties
Most agreements include:
- A long list of claims you are giving up
- A warranty that you have not already found another job or breached your contract
- Confirmation that you have disclosed all relevant issues to the employer
Be honest with your solicitor about anything that might make a warranty untrue so they can adjust the drafting.
7. Confirm the adviser’s certificate and legal fees
For a settlement agreement to be valid in Great Britain, you must receive independent legal advice from an insured adviser. The agreement should:
- Name your adviser
- Confirm they hold appropriate insurance
- Record any contribution your employer will make to your legal fees
- Always get written advice so you have a record of what was discussed.
