Great Britain • England, Wales & Scotland • Northern Ireland has separate law
This is general legal information, not legal advice.

Settlement Agreement Basics (UK)

What makes it binding • the six statutory conditions • independent adviser • protected conversations • what can never be signed away • tax • the clock
Quick summary: a settlement agreement is a written contract in which you give up named employment claims, usually for a payment. It only works if it meets conditions set by statute — including advice from an independent adviser who is named in the agreement.
This page explains section 203 of the Employment Rights Act 1996, the Equality Act 2010 equivalent, who counts as an independent adviser, what a “protected conversation” does and does not cover, what no agreement can take away, how the payment is taxed, and what happens to your tribunal deadline while you decide.
Specialty: settlement agreement guidance for employees and workers in England, Wales and Scotland — validity conditions, adviser rules, pressure and timing, written in plain English against the statutes themselves.
If your employer has handed you a draft, opened a “without prejudice” conversation, or given you a deadline to sign, this page helps you work out what you are actually being asked to give up — before you answer.
What this page gets you to
  • A settlement agreement question list — the questions to put to your employer and to your adviser, in order.
  • A validity check — whether the draft in front of you names an adviser, names the claims, and says the statutory conditions are met.
  • A timing check — what is happening to your tribunal deadline while the negotiation runs.
This is general legal information, not legal advice.
Start here (free)
Start Free Chat →
Free Legal Starter • £0 forever • Login required • GB employment information
Validity conditions
Adviser rules
Protected conversations
Time limits
Best for people saying:
  • “HR called it an off-the-record chat.”
  • “They want it signed by Friday.”
  • “It says full and final settlement of all claims.”
  • “Do I really have to use a solicitor?”
  • “Is the whole payment tax-free?”
  • “If I don’t sign, have I lost my claim?”
You can start with one paragraph. We’ll ask only what’s needed.

How this guide helps

Three steps — clear, practical, deadline-aware.
1) Work out what you are giving up
A settlement agreement is only effective for the claims it names. Read the list of claims before you read the number.
Example: “It settles unfair dismissal — but does it mention discrimination?”
2) Check the validity conditions
Writing, named claims, named adviser, adviser insurance, and a statement that the statutory conditions are met. All of them, not most.
A condition missed is a waiver that does not bite.
3) Keep your deadline alive
Negotiating does not pause a tribunal time limit by itself. Only the statutory early-conciliation rules do that.
So you never trade a claim you have already lost the right to bring.

What a settlement agreement is, and why the law treats it as an exception

The default rule is that you cannot contract out of employment rights at all.
A settlement agreement is a written contract in which you agree not to bring, or not to continue, particular employment claims — usually for a payment. Under section 203(1) of the Employment Rights Act 1996 a provision in any agreement is void so far as it tries to exclude or limit the Act, or to stop someone bringing proceedings under it before an employment tribunal. Sections 203(2)(f) and 203(3) carve out the exception: an agreement to refrain from starting or continuing proceedings survives if the “conditions regulating settlement agreements” are met. They were called compromise agreements before the Acas Code on settlement agreements took effect on 29 July 2013.
Other rights sit in other Acts with the same machinery. Section 144 of the Equality Act 2010 makes a term unenforceable so far as it excludes that Act, allowing an exception only for a contract made with a conciliation officer’s assistance or a qualifying settlement agreement under section 147. Trade-union and collective rights are dealt with in section 288 of TULRCA 1992. Paragraph 5 of the Acas Code on settlement agreements adds the point people forget: settlement agreements are voluntary.
“Full and final settlement” is not enough
Paragraph 4 of the Acas Code on settlement agreements says that wording is not sufficient — the agreement has to state specifically the claims it is intended to cover. ERA s.203(3)(b) says the same: it must relate to the particular proceedings.
There is a second, different route
Under ERA s.203(2)(e), where an Acas conciliation officer has taken action under sections 18A–18C of the Employment Tribunals Act 1996, the voiding rule does not apply and the independent-adviser conditions below are not required. Acas states its Code does not apply to settling through early conciliation.

The statutory conditions that make it binding

ERA 1996 s.203(3) — six conditions, all of which have to be satisfied.
  • (a) In writing. An oral deal does not engage the exception at all.
  • (b) It relates to the particular proceedings. The claims have to be identified.
  • (c) You received advice from a relevant independent adviser on the terms and effect of the agreement, and in particular its effect on your ability to pursue your rights before an employment tribunal.
  • (d) Insurance or professional indemnity was in force when the adviser gave the advice, covering the risk of a claim by you for loss arising from it.
  • (e) The agreement identifies the adviser. By name — not “a solicitor”.
  • (f) The agreement states that the conditions regulating settlement agreements under the Act are satisfied.
Equality Act claims: section 147(3) mirrors this for a qualifying settlement agreement, and requires the advice to have been received before entering into the contract. TULRCA claims: section 288(2B) mirrors the six conditions, but section 288(2C) excepts proceedings for non-compliance with section 188 (collective redundancy consultation).
Checked against legislation.gov.uk on 8 August 2026. ERA 1996 s.203, Equality Act 2010 ss.144 and 147 and TULRCA 1992 s.288 are all marked as extending to England, Wales and Scotland.

Who counts as an independent adviser — and who does not

This is a validity condition, not a nice-to-have. “Any adviser will do” is the single most common mistake.
Who can advise (ERA s.203(3A))
A qualified lawyer; an officer, official, employee or member of an independent trade union certified in writing by the union as competent and authorised to advise on its behalf; a person working at an advice centre certified in writing by the centre; or a person of a description specified by order of the Secretary of State.
Who cannot (ERA s.203(3B))
Anyone who is, is employed by, or is acting in the matter for the employer or an associated employer; a union or advice centre that is the employer or an associated employer; and, for an advice-centre adviser, a person to whom you pay for the advice.
“Qualified lawyer” differs in Scotland
In England & Wales it means an authorised person under the Legal Services Act 2007 for a right of audience or the conduct of litigation (s.203(4)(a)). In Scotland it means an advocate, or a solicitor holding a practising certificate (s.203(4)(b)). The Equality Act uses the same split at s.147(6).
Equality Act adds a “connected person” test
Section 147(5) rules out a party to the contract or complaint, a connected person, and anyone employed by or acting for them. Section 147(8)–(9) defines connection by company control and by any connection giving rise to a conflict of interest.

“Protected conversations”, without prejudice, and undue pressure

Off the record is much narrower than most people are told.
Section 111A of the Employment Rights Act 1996 makes evidence of pre-termination negotiations — any offer or discussion, before the employment ends, with a view to it ending on agreed terms — inadmissible, but only “in any proceedings on a complaint under section 111”: ordinary unfair dismissal. It does not apply where, on your case, a statutory provision requires the dismissal to be regarded as automatically unfair (s.111A(3)); where something said or done was improper or connected with improper behaviour, the inadmissibility applies only so far as the tribunal considers just (s.111A(4)); and an offer can still be referred to on costs or expenses where that right was reserved (s.111A(5)). The Acas Code on settlement agreements confirms it does not cover discrimination, harassment, victimisation or other Equality Act claims, breach of contract or wrongful dismissal.
Time to think: 10 calendar days
Paragraph 12 of the Acas Code on settlement agreements: as a general rule a minimum of 10 calendar days should be allowed to consider the proposed formal written terms and to receive independent advice, unless the parties agree otherwise.
Being accompanied at the meeting
Paragraph 13: not a legal requirement, but employers should allow you to be accompanied by a work colleague, trade union official or trade union representative. Acas calls it good practice.
Improper — and not improper
Paragraph 18’s non-exhaustive list includes harassment, bullying, threats, victimisation, discrimination and undue pressure — such as refusing the paragraph 12 time, or saying before any disciplinary process has begun that rejection means dismissal. Paragraph 19: it is not improper to set out the reasons in a neutral manner, or to state factually the likely alternatives.
“Without prejudice” is a separate, common law principle: the Acas Code on settlement agreements explains it needs a genuine attempt to settle an existing dispute and does not apply where there has been fraud, undue influence or other unambiguous impropriety — a narrower test than the statutory one.
Failure to follow the Acas Code on settlement agreements does not by itself create liability and does not lead to an adjustment in compensation — unlike the Acas Code on discipline and grievance, where a tribunal can adjust an award.

What a settlement agreement can never sign away

Some wording is void however carefully it is drafted.
Whistleblowing. Section 43J(1) of the Employment Rights Act 1996 makes any provision in an agreement void in so far as it purports to preclude the worker from making a protected disclosure. Section 43J(2) applies that to any agreement between a worker and employer, including an agreement to refrain from instituting or continuing proceedings — so it expressly catches settlement agreements and their confidentiality clauses.
Anything the agreement does not name. The exception only applies to the particular proceedings identified, so unlisted claims are not settled by a generic sweeping-up clause.
Other categories are widely asserted — future or unknown personal injury claims, accrued pension rights, the right to enforce the agreement itself. Those were not traced to a primary source for this page, so it does not state them as rules. Ask your adviser.

How the payment is taxed

“The whole thing is tax-free” is wrong, and it is expensive to be wrong about.
Section 401(1) of the Income Tax (Earnings and Pensions) Act 2003 applies to payments and benefits received directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of employment. Section 403(1) provides that such a payment counts as employment income if and to the extent that it exceeds the £30,000 threshold, and section 403(4) requires aggregation with other payments for the same employee.
Critically, section 401(3) says the Chapter does not apply to any payment or benefit chargeable to income tax apart from the Chapter. In plain terms: sums already taxable as earnings — not everything a draft labels “compensation” — are taxed as earnings and are not sheltered by that threshold. ITEPA 2003 s.401 extends to the whole United Kingdom, so this is a UK-wide tax rule, not a GB-only employment one.
This page does not explain how notice pay is carved out of that threshold, or the employer National Insurance treatment of the excess — neither was verified here. Ask an adviser or accountant to run the split for your figures.

The questions to answer before you sign — and the clock that is still running

This is the shape of the settlement agreement question list this page leads to.
1) Which claims does it name?
List them. Then list the ones you think you might have that are missing.
2) Does it name the adviser?
And does it state that the statutory conditions are satisfied? Both are conditions in their own right.
3) Who is paying for the advice, and is that adviser independent?
Not acting for the employer or an associated employer.
4) What is the split of the payment?
Which parts are taxable as earnings and which fall inside the termination-payment rules.
5) What does the confidentiality clause say?
And do you understand that it cannot stop a protected disclosure?
6) How long have you actually been given?
Measure it against the 10 calendar days in the Acas Code on settlement agreements, and record the date you received the draft.
The clock does not stop while you negotiate
An unfair dismissal complaint must be presented before the end of three months beginning with the effective date of termination (ERA s.111(2)), extendable only where the tribunal is satisfied it was not reasonably practicable to present it in time. A discrimination complaint runs three months from the date of the act, or such other period as the tribunal thinks just and equitable (Equality Act s.123(1)), with conduct extending over a period treated as done at the end of it (s.123(3)).
You must notify Acas before presenting a claim and cannot present one without the certificate (Employment Tribunals Act 1996 s.18A). Only that early-conciliation process stops the clock, under ERA s.207B. Acas states that raising the problem with your employer first does not change the tribunal time limits, and that Acas cannot represent you, take sides, tell you whether you have a valid case or give legal advice.
Create your settlement agreement question list free with AI Lawyer
Your Free Legal Starter plan is free forever and includes 1 document build and 25 legal & business questions. Answer a few plain-English questions and AI Lawyer drafts your settlement agreement question list — then download it and have it checked before you rely on it.
Free Legal Starter • £0 forever • 1 document build • 25 Q&A • Login required
A generated draft is a starting point, not legal advice. Have it reviewed before you sign, send or file it.

Long FAQ (UK settlement agreements)

Tap to expand. Written for employees and workers in England, Wales and Scotland.
1) Do I have to take legal advice, or is that just the employer being cautious?
For the statutory settlement-agreement route it is a validity condition, not a courtesy. ERA 1996 s.203(3)(c) requires advice from a relevant independent adviser on the terms and effect of the agreement and in particular its effect on your ability to pursue rights before an employment tribunal. The Equality Act equivalent is s.147(3)(c).
2) Can a union representative advise me instead of a solicitor?
ERA s.203(3A)(b) allows an officer, official, employee or member of an independent trade union who has been certified in writing by the union as competent to give advice and authorised to do so on the union’s behalf. An adviser at an advice centre can also qualify under s.203(3A)(c) if certified in writing by the centre.
3) Is “in full and final settlement of all claims” enough to cover everything?
No. The Acas Code on settlement agreements says at paragraph 4 that such wording is not sufficient and the agreement has to state specifically the claims it is intended to cover. ERA s.203(3)(b) requires the agreement to relate to the particular proceedings.
4) How long should I be given to consider the offer?
Paragraph 12 of the Acas Code on settlement agreements says that as a general rule a minimum of 10 calendar days should be allowed to consider the proposed formal written terms and to receive independent advice, unless the parties agree otherwise. Not allowing that reasonable time is listed at paragraph 18 as an example of undue pressure.
5) My employer said the meeting was “protected” — does that mean nothing can be used at all?
No. ERA s.111A makes pre-termination negotiations inadmissible only in proceedings on an ordinary unfair dismissal complaint under s.111. It does not apply where the claim is that the dismissal was automatically unfair (s.111A(3)), and the Acas Code on settlement agreements confirms it does not cover discrimination, harassment, victimisation, other Equality Act claims, breach of contract or wrongful dismissal.
6) Can a confidentiality clause stop me whistleblowing?
Not lawfully. ERA s.43J(1) makes any such provision void so far as it purports to preclude a worker from making a protected disclosure, and s.43J(2) applies that expressly to agreements to refrain from starting or continuing proceedings.
7) Is the payment tax-free?
Not automatically. ITEPA 2003 s.403(1) provides that a termination payment within that Chapter counts as employment income to the extent that it exceeds the £30,000 threshold, aggregating other payments for the same employee. Section 401(3) keeps sums that are already chargeable as earnings outside the Chapter, so they are taxed as earnings.
8) What happens to my tribunal deadline while we negotiate?
It keeps running. Acas states that raising the problem with your employer first does not change tribunal time limits. Only the statutory early-conciliation mechanism in ERA s.207B pauses and extends the limit, and it is triggered by contacting Acas — not by talking to your employer.
9) Do I have to sign?
No. Paragraph 5 of the Acas Code on settlement agreements states that settlement agreements are voluntary: parties do not have to agree them, do not have to enter discussions, and do not have to accept the terms initially proposed.
10) Can I bring someone to the settlement meeting?
Paragraph 13 of the Acas Code on settlement agreements says this is not a legal requirement, but that employers should allow you to be accompanied by a work colleague, trade union official or trade union representative, and calls it good practice. That is different from the statutory right to be accompanied at a disciplinary or grievance hearing.
11) Is a COT3 through Acas the same thing?
It is a different statutory route. ERA s.203(2)(e) disapplies the voiding rule where an Acas conciliation officer has taken action under ss.18A–18C of the Employment Tribunals Act 1996, so the six conditions above are not required. This page does not describe the Acas process in detail because that detail was not verified against a primary source here — ask Acas or an adviser.
12) Does any of this apply in Northern Ireland?
No. Every provision cited on this page — ERA 1996 ss.43J, 111, 111A, 203, 207B; Equality Act 2010 ss.123, 144, 147; TULRCA 1992 s.288; Employment Tribunals Act 1996 s.18A — is marked as extending to England, Wales and Scotland only. Northern Ireland has its own separate employment legislation and its own conciliation body. Do not apply these section numbers, conditions or time limits to a Northern Ireland employment.
13) Can Dogetlawyer tell me whether the number on offer is fair?
No — valuing a claim is advice, and it depends on facts and figures we cannot verify for you. What AI Lawyer can do is help you build the question list, check whether the draft names the claims and the adviser, and organise your timeline so your adviser spends their time on the parts that matter.
Build your settlement agreement question list before you reply
One message is enough. Your Free Legal Starter plan includes 1 document build and 25 legal & business questions, free forever.
Create it free with AI Lawyer →
Free Legal Starter • £0 forever • 1 document build • 25 Q&A • Login required
This is general legal information, not legal advice. Statutory references checked against legislation.gov.uk on 8 August 2026.