A settlement agreement is a legally binding agreement between an employer and employee (or ex-employee). It usually provides for a negotiated financial sum, in return for which the former employee agrees not to pursue any further claim against the employer such as taking them to industrial tribunal.

Every settlement agreement must be tailored to reflect the individual circumstances of the case in question.
A settlement agreement has to be explained to the employee by an independent advisor.

From an employer’s perspective a settlement agreement can be advantageous in that it draws a line under a difficult situation and guards against future claims as well as reducing the risk of potentially adverse publicity. For the employee, the financial recompense can make a settlement agreement a worthwhile option.