Plain-English answers to the most common questions about settlement agreements, redundancy and employment tribunals.
Yes — and you often should. A settlement agreement is a negotiated contract, not a take-it-or-leave-it offer. Your employer's first offer is almost never their best offer. The key is to understand your legal position first — particularly whether you have any employment claims (unfair dismissal, discrimination, whistleblowing) that represent risk to your employer. A solicitor can assess this and negotiate on your behalf. Because your employer pays for your legal advice, this costs you nothing.
No — employers are not legally required to offer a settlement agreement. They do so when it is in their interests: typically to achieve a clean exit, avoid tribunal risk, or include confidentiality obligations that a standard redundancy does not provide. If your employer has not offered a settlement but you believe you have been treated unlawfully, you can raise a grievance or seek legal advice about your options.
A straightforward settlement agreement can be completed in 1–2 weeks. The ACAS Code of Practice recommends giving employees at least 10 calendar days to consider the offer and take advice. More complex negotiations — where terms are being disputed or legal claims are being valued — can take several weeks. There is rarely a reason to rush. Your employer should not put you under undue pressure to sign quickly.
Yes — many redundancies are implemented via settlement agreements. The agreement will typically include your statutory redundancy pay (and any enhanced redundancy), notice pay, holiday pay, and an ex-gratia payment, all combined in a single document that also waives your right to bring claims. This is advantageous for your employer (certainty, confidentiality) and can be advantageous for you (the ability to negotiate the package and reference).
If you decline a settlement agreement, you remain employed (unless you have been dismissed or resigned). Your employer cannot force you to sign. If they have already dismissed you, you may have the option to bring tribunal claims. If the offer was made during a "protected conversation" and you are still employed, the employer cannot automatically use the existence of that conversation against you in unfair dismissal proceedings. Your solicitor can advise on your specific position.
An ex-gratia payment is money paid by the employer without any legal obligation to do so — out of goodwill, or as compensation for loss of employment. In a settlement agreement, it is the element beyond your contractual and statutory entitlements. The first £30,000 of qualifying ex-gratia payments (combined with any redundancy pay) is tax-free. The size of the ex-gratia is the main negotiating point in most settlement discussions.
Yes — they are the same document. The terminology changed in 2013 when the Enterprise and Regulatory Reform Act renamed "compromise agreements" as "settlement agreements." If you see either term, they refer to the same thing: a legally binding contract under which you waive employment tribunal claims in exchange for a financial payment.
Statutory redundancy pay is calculated using a formula based on your age, years of continuous service (up to 20 years count), and weekly pay (capped at £643/week in 2025/26). The multiplier is: half a week's pay per year of service when aged under 22; one week's pay per year when aged 22–40; one and a half weeks' pay per year when aged 41+. Use our Redundancy Calculator for an instant figure.
Statutory redundancy pay is tax-free up to £30,000, combined with any ex-gratia payment. Your notice pay (PILON) and any holiday pay are always fully taxable as earnings. Use our Settlement Tax Calculator to model your specific situation.
Yes — if you believe the redundancy was not genuine, the selection process was unfair, proper procedures were not followed, or you were selected for a discriminatory reason, you may have an unfair dismissal or discrimination claim. Employees with 2+ years' service can bring unfair dismissal claims; discrimination claims have no qualifying period.
Most claims must be started within 3 months minus 1 day of the act complained of (e.g. the date of dismissal). You must first notify ACAS (early conciliation) before issuing a claim — this pauses the time limit. For discrimination claims, the 3-month period runs from each discriminatory act. Equal pay claims have a 6-month time limit. These deadlines are strict — missing them can mean losing your right to claim entirely.
It is free to submit an employment tribunal claim (fees were abolished in 2017). However, you will typically incur legal costs if you instruct a solicitor to represent you. Many employment solicitors offer no win, no fee arrangements for strong unfair dismissal or discrimination claims. Employment tribunals do not usually award legal costs to the winning side — each party normally bears their own costs.
The compensatory award for unfair dismissal is currently capped at the lower of one year's gross pay or £115,115. Under the Employment Rights Act 2025, this cap is being abolished from January 2027. Once removed, there will be no upper limit on compensatory awards — meaning strong unfair dismissal claims by high earners could result in significantly larger awards. Our tribunal calculator shows your award under both the current capped and post-2027 uncapped rules.
You are not legally required to have a solicitor, but for anything beyond a very simple claim, legal representation significantly improves your prospects and ensures you present your case correctly. For settlement agreements, your employer pays for your legal advice — so there is no reason to go without. For tribunal claims, many solicitors offer free initial consultations and no win, no fee arrangements for strong cases.
You must notify ACAS before submitting an employment tribunal claim — it is a mandatory prerequisite. An ACAS conciliator will try to help both sides settle without going to tribunal. You are not required to settle; if conciliation fails, ACAS issues a certificate and you can proceed to tribunal. Crucially, notifying ACAS pauses your tribunal time limit. Read our full ACAS guide →
Our employment law guides cover settlement agreements, unfair dismissal, constructive dismissal, discrimination and more in depth. Or speak to a solicitor — your employer pays on settlement agreements.