Why does the employee need their own lawyer — can't we just sign?

Because without it there is no deal. Section 203(3) of the Employment Rights Act 1996 makes a settlement agreement ineffective to waive statutory claims unless the employee has taken advice from a relevant independent adviser — identified in the agreement and insured — and the agreement states those conditions are met. It's customary (near-universal) for the employer to pay a contribution towards that advice: £500–£750 + VAT is the current going range, more for complex deals.

Is the settlement payment tax-free?

Partly, if structured correctly. The first £30,000 of a genuine ex-gratia termination payment is currently tax-free (ITEPA 2003 ss.401–403). Notice pay is always taxed as earnings — since April 2018 the post-employment notice pay rules catch it whether or not you pay in lieu — and holiday pay is taxed too. The agreement should split the package explicitly so nobody gets an HMRC surprise.

Can I have a conversation they can't use against me?

Mostly, yes — that's the "protected conversation". Under s.111A ERA 1996, a pre-termination negotiation is inadmissible in an ordinary unfair-dismissal claim. Two hard limits: the protection does not apply to discrimination or whistleblowing claims, and "improper behaviour" — threats, undue pressure, not giving reasonable time — removes it. Run the conversation from a script that respects both.

What if the employee refuses to sign?

A refused offer doesn't poison the well if you ran it properly: s.111A keeps the conversation out of an ordinary unfair-dismissal claim, and you fall back to the fair formal process — performance management, redundancy consultation or disciplinary — that you should be prepared to run in parallel anyway. An offer made instead of any fair process is where employers get into trouble.

How long do I have to give them to decide?

The Acas Code of Practice says employees should get a minimum of 10 days to consider a settlement offer and take advice, unless they agree otherwise. Giving less — or pairing the offer with a deadline ultimatum — risks being treated as improper behaviour, which strips the conversation of its s.111A protection.

Do I have to give a reference?

There's generally no legal duty to give one — but an agreed reference is one of the most-negotiated schedules in settlement deals, and it costs you little. If you do give a reference, it must be true, accurate and fair. Agreeing the exact wording in the settlement agreement protects both sides from later disputes.

US: are there extra rules for employees aged 40+?

Yes — the Older Workers Benefit Protection Act. For a valid waiver of age-discrimination claims, the severance agreement must name the ADEA, advise the employee in writing to consult an attorney, give 21 days to consider (45 days in a group termination, with a decisional-unit disclosure), and allow a non-waivable 7-day revocation period after signing. GitLaw's US severance drafts build these mechanics in when they apply.

Free settlement agreement pack — employer side

Part ways properly — on paper.

GitLaw drafts the employer's full set: the protected-conversation script, the without-prejudice offer, the settlement agreement and the agreed reference. UK agreements and US severance. Free to preview.

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The exit, done properly

Four documents between a problem and a clean exit.

A UK settlement agreement only binds if the employee takes independent legal advice on it — that's the law (s.203 ERA 1996), not a sales pitch. GitLaw drafts your side of the process and is upfront about theirs: budget £500–£750 + VAT for their adviser. A preview, not legal advice.

Previewing an exit package for [Employee Name], Senior Designer · drafted 6 August 2026

Settlement agreement

SETTLEMENT AGREEMENT (DRAFT) — prepared 6 August 2026 Between the Company and [Employee Name], Senior Designer 1. TERMINATION Employment ends on the Termination Date. The Company pays salary and accrued holiday to that date, plus notice or a payment in lieu (taxed as earnings). 2. TERMINATION PAYMENT An ex-gratia payment of £9,000 within 14 days of the later of the Termination Date and this agreement taking effect. The first £30,000 of a genuine ex-gratia termination payment is currently tax-free (ITEPA 2003 ss.401–403); notice pay is always taxed. 3. WAIVER OF CLAIMS [Employee Name] waives the statutory and contractual claims itemised in Schedule 1 — listed individually, because s.203(3) requires the agreement to relate to particular claims. 4. CONDITIONS FOR VALIDITY (s.203(3) ERA 1996) This agreement is not binding unless: it is in writing; [Employee Name] has received advice from a relevant independent adviser on its terms and effect; the adviser is identified, and insured; and this agreement states that these conditions are satisfied. The adviser's certificate is at Schedule 2. The Company contributes £750 + VAT to the cost of that advice. 5. REFERENCE The agreed reference at Schedule 3 will be given in response to any enquiry. 6. PERMITTED DISCLOSURES Nothing in this agreement prevents protected disclosures, reports to regulators or the police, or any disclosure required by law.

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Settlement agreement (UK) — Acas

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What a settlement agreement costs, and what it requires

Because the law makes the employee take independent advice, a whole industry serves them. You — the one who must produce the documents and run the process correctly — get static templates and "call us" pages. This page is the employer's side, drafted properly.

£500–£750+ VAT — the typical employer contribution to the employee's independent legal advice

10 daysthe minimum the Acas Code says an employee should get to consider a settlement offer

£30,000of a genuine ex-gratia termination payment is currently tax-free — notice pay never is

ERA 1996 ss.111A & 203(3); Acas Code of Practice on settlement agreements; ITEPA 2003 ss.401–403 (HMRC EIM13760); published adviser-fee ranges (2025)

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How it works

Describe the situation

Who's leaving, why, and what you want to offer — in plain English. GitLaw asks what matters (US employee over 40? group exit?) before it drafts.

Get the full document set

Conversation script, offer letter, agreement and agreed reference — consistent with each other and with the Acas process.

Close it properly

Send for signature, factor in their adviser's sign-off, and store the signed agreement with the timeline documented.

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