Settlement Agreement Review UK

Payment Categorisation & Tax

The split between ex gratia termination payments (up to £30k tax-free) and taxable elements (PILON, notice pay, benefits) significantly affects your net receipt.

Scope of Claims Waived

Settlement agreements should identify the specific claims being waived. Unusually broad waivers covering claims the employee may not know they have are a concern.

Confidentiality & Non-Derogatory

Standard confidentiality prevents disclosure of the agreement terms. Non-derogatory clauses should be mutual — preventing the employer from making negative statements about you as well.

Post-Termination Restrictions

Settlement agreements sometimes include or reaffirm non-compete and non-solicitation clauses. Arbiter checks whether these are proportionate given the settlement context.

Reference Terms

An agreed reference is valuable. Arbiter checks whether the agreement specifies the form and content of any reference the employer will provide.

Whistleblower Carve-Out

Public interest disclosures cannot lawfully be gagged. Arbiter checks whether confidentiality clauses contain the required protection for future whistleblowing disclosures.

What is a settlement agreement in UK employment law?

A settlement agreement (formerly compromise agreement) is a legally binding contract under which an employee agrees to waive their employment claims in exchange for a financial payment and other terms. To be valid, the employee must receive independent legal advice before signing.

What is the tax-free threshold on a UK settlement agreement?

The first £30,000 of a genuine ex gratia termination payment in a settlement agreement is generally free of income tax and National Insurance contributions. Payments in lieu of notice (PILON) are taxable. VP Arbiter identifies how the agreement categorises payments to flag potential tax exposure.

What is the difference between a COT3 and a settlement agreement?

A COT3 is a conciliated agreement reached through ACAS, which does not require the employee to obtain independent legal advice. A settlement agreement is a private contract that requires independent advice from a named, qualified adviser. Both settle employment claims but through different processes.

What does a confidentiality clause in a settlement agreement mean?

Settlement agreements commonly include mutual confidentiality clauses preventing either party from disclosing the existence of the agreement or its financial terms. They may also include non-derogatory clauses preventing adverse comments about the employer. VP Arbiter flags confidentiality provisions that are unusually broad or that may conflict with whistleblower protections.

Can VP Arbiter review my settlement agreement for free?

Yes. VP Arbiter offers one free analysis per 30 days with no account required. Note that settlement agreements must be reviewed by a qualified independent legal adviser for them to be legally effective — VP Arbiter is a supplementary screening tool, not a substitute for that advice.