exitagreement
Key points
- A settlement agreement is the only routine way to give up employment claims for money, and it is void unless six conditions in s.203(3) of the Employment Rights Act 1996 are all met.
- One of those conditions is independent advice. That is the structural reason a solicitor is involved at all, and the reason employers normally offer to pay for one.
- The Acas Code of Practice recommends at least 10 days to consider an offer. It is a recommendation, not a statutory deadline — but giving too little time can cost the employer the protection on the conversation.
- The money has two halves that behave completely differently for tax. A single headline total tells you almost nothing until it is split.
What a settlement agreement actually does
If the document in front of you says compromise agreement, or somebody has said “COT3” or “severance” at you, start with the plain-words page that sorts those thirteen terms out — two of them mean something materially different from the rest.
An employment contract cannot sign away your employment rights. Section 203(1) of the Employment Rights Act 1996 says so in one sentence, and it is worth reading in the original because it is broader than most people expect — it catches any agreement, not only a contract of employment.
Any provision in an agreement (whether a contract of employment or not) is void in so far as it purports— (a) to exclude or limit the operation of any provision of this Act, or (b) to preclude a person from bringing any proceedings under this Act before an employment tribunal.Read the section on legislation.gov.uk
That is the default. If the default were the whole story, no employer could ever buy certainty: they could pay someone to leave and still be taken to a tribunal the following month. So the same section creates a narrow exit. An agreement can validly stop you bringing a claim, but only if it satisfies a closed list of conditions.
Six conditions, not five
Most summaries of this list five conditions. The statute sets out six, and the sixth is the reason settlement agreements read the way they do — the document has to declare its own compliance.
The same diagram as a table
| Sub-section | Condition |
|---|---|
| (a) | The agreement must be in writing |
| (b) | The agreement must relate to the particular proceedings |
| (c) | The employee or worker must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement |
| (d) | There must be in force, when the adviser gives the advice, insurance or a professional indemnity covering the risk of a claim in respect of that advice |
| (e) | The agreement must identify the adviser |
| (f) | The agreement must state that the conditions regulating settlement agreements under the Act are satisfied |
Read section 203 on legislation.gov.uk. Territorial extent as printed on the source: England, Wales and Scotland.
The conditions, in full:
For the purposes of subsection (2)(f) the conditions regulating settlement agreements under this Act are that— (a) the agreement must be in writing, (b) the agreement must relate to the particular proceedings, (c) the employee or worker must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an employment tribunal, (d) there must be in force, when the adviser gives the advice, a contract of insurance, or an indemnity provided for members of a profession or professional body, covering the risk of a claim by the employee or worker in respect of loss arising in consequence of the advice, (e) the agreement must identify the adviser, and (f) the agreement must state that the conditions regulating settlement agreements under this Act are satisfied.Read the section on legislation.gov.uk
Condition (c) is the one that puts a solicitor in the room. Note what it actually requires: advice on the terms and effect of the proposed agreement, and in particular on its effect on your ability to pursue your rights before an employment tribunal. It does not require the adviser to negotiate for you, and it does not require them to tell you the deal is good. That is a separate piece of work, and whether you want it is the single most useful thing you can decide before you contact anyone.
Those six conditions are only six of about sixteen clause types in a real agreement — the rest are contract, and therefore negotiable.
Condition (d) is the one people skip and should not. The adviser has to be insured at the moment the advice is given. That is what makes “a friend who is a solicitor” a bad idea unless they are covered for this work, and it is why the agreement names the adviser and their firm.
The statute also says who cannot be your adviser, and the exclusion is absolute.
A person is a relevant independent adviser for the purposes of subsection (3)(c)— (a) if he is a qualified lawyer, (b) if he is an officer, official, employee or member of an independent trade union who has been certified in writing by the trade union as competent to give advice and as authorised to do so on behalf of the trade union, (c) if he works at an advice centre (whether as an employee or a volunteer) and has been certified in writing by the centre as competent to give advice and as authorised to do so on behalf of the centre … But a person is not a relevant independent adviser … if he is, is employed by or is acting in the matter for the employer or an associated employer.Read the section on legislation.gov.uk
We are not a law firm and we will never take a share of anything a firm earns. The only payment we would accept from a firm is a fixed amount per enquiry, agreed in advance, the same whether you instruct someone, whether your settlement is £3,000 or £300,000, and whether the case settles at all. There is no version of this where we would do better by sending you to one firm rather than another, and an enquiry goes to a firm only with your agreement. The whole arrangement is written out in the disclaimer linked at the foot of every page.
How long you have to sign
This is the question the rest of the internet does not answer, so it has its own page. The short version: there is no statutory deadline, and there is a strong recommendation.
The same diagram as a table
| Measure | Days | Source |
|---|---|---|
| Recommended minimum | 10 | Acas Code of Practice on settlement agreements |
| Offered in this example | 4 | Illustrative |
| Shortfall | 6 | Calculated |
The Acas statutory Code of Practice on settlement agreements recommends allowing at least 10 days to consider one. A deadline shorter than that is not unlawful. It is, however, a problem for the employer rather than for you: Acas is explicit that where someone is not given enough time, the settlement discussion itself can end up in front of a tribunal as evidence, which is the opposite of what an employer was paying for.
The full answer, including what to say if the deadline is unreasonable.
Who pays for the solicitor
Normally the employer, and normally by naming a contribution inside the agreement itself. Acas puts it carefully and so will we: the employer should consider offering to pay the cost of independent advice, and they do not have to do this. Treat a contribution as the strong convention it is, not as an entitlement.
What that contribution buys is usually the sign-off: reading the agreement, advising you on its terms and effect, and signing the adviser's certificate. If you want the figure challenged, that is more work and the conversation about who pays for it is a different conversation. What the contribution normally covers, and what happens when it does not.
What the figure is made of
A settlement figure is not one number. It is two, bolted together, and they are taxed under different rules. Comparing two offers by their headline totals is how people accept the worse one.
The same diagram as a table
| Part | What it covers | Amount | Tax treatment |
|---|---|---|---|
| Part 1 — contractual | Notice pay, holiday pay, unpaid wages, bonus or commission | £8,400 | Income tax and National Insurance in full |
| Part 2 — ex gratia | Statutory redundancy pay, compensation for loss of employment, injury to feelings | £21,000 | First £30,000 free of tax and National Insurance |
| Total | — | £29,400 | — |
Threshold figure: Income Tax (Earnings and Pensions) Act 2003, s.403(1). Illustrative amounts.
Part one is contractual. Notice pay, accrued but untaken holiday, unpaid wages, a bonus or commission you had already earned. These are things you were owed anyway. They are taxed as earnings, in full, and no threshold applies to them. Negotiating hard over this half is usually wasted effort: the amount is whatever the contract and the calendar say it is.
That is the whole of payment in lieu of notice, too: earnings, taxed in full, whatever the agreement calls it.
Part two is compensation. Statutory redundancy pay where it applies, and an ex gratia payment for loss of employment. This is the half that is actually being negotiated, and it is the half the £30,000 threshold in the Income Tax (Earnings and Pensions) Act 2003 attaches to — the ex gratia payment.
If the dismissal is a redundancy, a large part of Part 2 may be the statutory redundancy payment you were owed regardless — which is not the same thing as compensation. And if a discrimination claim is anywhere in the picture, the agreement has to satisfy a second statute entirely.
Two offers with the same total can therefore be worth meaningfully different amounts in your account, purely because of how they are split. How the threshold works, and the trap in payment in lieu of notice.
Not sure what your agreement is worth?
Run the calculator first — it is free and nothing is held back behind a form. The enquiry form is there if you want to send us the numbers. We pass an enquiry to a firm only with your agreement, and only to a firm entitled to receive it.
The statutory floor, and why it is only a floor
Two of the figures in a settlement are fixed by statute and can be worked out exactly. Statutory notice is set by s.86(1) of the Employment Rights Act 1996 and runs one week per year of service up to a ceiling of twelve.
The notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for one month or more— (a) is not less than one week’s notice if his period of continuous employment is less than two years, (b) is not less than one week’s notice for each year of continuous employment if his period of continuous employment is two years or more but less than twelve years, and (c) is not less than twelve weeks’ notice if his period of continuous employment is twelve years or more.Read the section on legislation.gov.uk
Statutory redundancy pay, where the dismissal is a redundancy and you have at least 2 years’ service, is worked out from your age, your length of service and a week’s pay — except that a week’s pay is capped. For 2026/27, GOV.UK puts the cap at £751 and the maximum statutory payment at £22,530.
That cap is the reason the statutory number is a floor rather than a valuation. If you earn more than £751 a week, the formula is already understating your loss before anyone has argued about anything — and how far it understates it depends on where you work. The gap between local pay and the statutory cap, city by city.
Where to go next
- How long do I have to sign?
- Settlement calculator
- Who pays the solicitor?
- Can I negotiate?
- When does the money arrive?
- How is it taxed?
- Is it a redundancy?
- Discrimination involved?
- What is in the document?
- Thinking of resigning?
- Off sick?
Facing a disciplinary, or already dismissed
- Called to a disciplinary hearing?
- Suspended?
- Do you have an unfair dismissal claim?
- How long do you have to claim?
- Acas early conciliation
- What would a tribunal award?
Common questions
Do I have to use a solicitor to sign a settlement agreement?
In practice, yes. Section 203(1) of the Employment Rights Act 1996 makes any agreement void in so far as it tries to stop you bringing a claim, and section 203(3) then sets out the only way round that: six conditions, one of which is that you received advice from a relevant independent adviser on the terms and effect of the agreement. Without that advice the waiver does not work, which is why an employer wants you to take it as much as you do. A certified trade union officer or a certified advice centre worker can also give that advice, but a solicitor is the usual route.
Is exitagreement.co.uk a law firm?
No. We are an independent publisher. We write guidance on UK settlement agreements and we run an enquiry form. We do not practise law, we are not regulated by the Solicitors Regulation Authority, we do not give legal advice and we do not represent anyone. If you send an enquiry it comes to us, and we pass an enquiry to a firm only with your agreement.
What does it cost to use this site?
Nothing. You are never billed by us. If a firm ever pays us for an enquiry, the only arrangement we accept is a fixed fee agreed in advance, which does not change depending on whether you instruct anyone, what happens afterwards, or what a firm charges you.
Do you choose a firm for me?
No, and we are deliberate about that. We do not rank firms, we do not score them and we do not independently vet them. An enquiry goes to a firm only with your agreement, and only to a firm entitled to receive it; if no firm can take it, it goes nowhere else. Because the only fee we would accept is fixed per enquiry rather than taken out of what a firm earns, we would have nothing to gain from steering an enquiry one way or another.
How long do I get to think about the offer?
The Acas statutory Code of Practice on settlement agreements recommends allowing at least 10 days to consider one. That is a recommendation rather than a deadline in any statute, and it can reasonably be longer, for example as an adjustment for a disabled worker. It still carries weight: Acas says that where too little time is given, settlement discussions could be used as evidence in a tribunal claim, which removes the protection the conversation was supposed to have.
Will my employer pay for the advice?
Usually, but it is not a right. Acas says the employer 'should consider offering to pay the cost of any independent advice' and, in the same breath, that 'they do not have to do this'. Most agreements name a contribution, and most of the time that contribution covers a straightforward sign-off. Anyone who tells you the employer must pay, or that it will always be free to you, is overstating it.
Does any of this work differently in Scotland?
The employment rights do not. Employment law is reserved to the UK Parliament under Schedule 5 of the Scotland Act 1998, and the Employment Rights Act 1996 is printed with an extent of England, Wales and Scotland, so the same six conditions and the same time limits apply. What changes is the machinery around the tribunal: a different 1994 jurisdiction order, and the sheriff court rather than the county court for anything that has to leave the tribunal.
Can I still take advice if I have already signed?
Yes, and it is worth doing quickly. A signed agreement is a contract, and unpicking one is much harder than improving one before signature. But the clock on any underlying claim is still running in the background, and time limits in this area are short, so the sooner someone reads what you actually signed the more options are still open.
Sources cited on this page
- Employment Rights Act 1996, s.203 — restrictions on contracting out
- Employment Rights Act 1996, s.86 — minimum period of notice
- Acas — Settlement agreements
- Acas — Making a formal offer
- Acas — Discussing and negotiating an offer
- GOV.UK — Redundancy pay
- Scotland Act 1998, Schedule 5 — reserved matters
Every figure above was read from the source it is attributed to on 19 September 2026. How we check this.
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