An employee’s basic(ish) guide to UK settlement agreements
Last updated: 21/11/2025
Settlement agreements are a big deal. They’re also the result of a literal deal with your employer (or ex-employer, perhaps by the time the ink is dry). If you’re in the middle of the process and feeling a bit overwhelmed, or just curious about what it all means, this guide is for you.
At first glance, a settlement agreement can look like hieroglyphics, the kind only an ancient scribe or modern lawyer could decipher. The process itself can feel a little byzantine, and the situation a bit alien. Different worlds collide here: statutory process and economic reality, business expediency and workplace fairness, certainty and risk. We’re firmly in the employee’s corner, but we understand the employer’s world too, and we’ll step into it when it helps you see the full picture.
We’ll explain in plain terms how settlement agreements work under UK law, why employers use them, what rights you might be asked to waive, and how tax is usually handled. We’ll also look at common clauses, how redundancy fits in, what happens if an employer breaks the deal, and what your options are if you decide not to sign.
This isn’t legal advice and it’s not a substitute for getting your own. If you choose Settlement Advice 4U (SA4U), we’d consider it a privilege to give that advice one-to-one. In the meantime, the aim here is simply to make the world of settlement a little more familiar, turning any lingering sense of alienation into one of agency and purpose.