A settlement agreement is a document which details the terms of an agreement between an employer and employee in that the employee agrees to compromise specified contractual and statutory claims they may have against their employer, usually in exchange for payment of compensation.


Generally, a settlement agreement will have the effect of bringing the employee’s employment to an end and it will be used to compromise claims the employee may have in connection with the termination of their employment. However, settlement agreements can also be used during the course of the employee’s employment, to compromise claims up to a particular date.

A settlement agreement can also be used to settle Employment Tribunal claims the employee may have already brought against their employer.


The term ‘settlement agreement’ has been used since 29 July 2013. Prior to this date, these types of agreements were known as ‘compromise agreements’.