Home Legal Services Employment Settlement Agreements for Employees
Written by:Â Owen John, Employment Law Partner, Darwin Gray | Last updated: 24/10/2026 | Reviewed by: Owen John
People often think of redundancy and a settlement agreement as two different routes. They’re usually not. In a lot of redundancies, especially where the employer wants certainty and a clean break, they’ll run the redundancy and offer you a settlement agreement alongside it.
The deal is straightforward in principle. Your employer offers you more than your bare statutory entitlement, an enhanced package, and in return you agree to waive your right to bring claims, including any claim that the redundancy itself was unfair. It gives them certainty, and it gives you more money and a cleaner exit than the statutory minimum.
The question is always whether the offer is good enough to be worth giving up those rights. That’s where it pays to take a proper look before signing.
A redundancy settlement agreement typically bundles together several things, and it’s worth knowing what each one is:
The first £30,000 of genuine redundancy and ex gratia compensation can often be paid tax-free, though notice pay is taxed in full. Getting the split right matters, our settlement agreement tax guide explains how.
Before you sign away your claims, it’s worth asking whether the redundancy was handled properly. A genuine redundancy needs a genuine reason (the role really is going), a fair selection process, meaningful consultation, and proper consideration of alternative roles. If any of that is missing, you might have an unfair dismissal claim, which is worth something, and gives you leverage to negotiate a better settlement.
This is exactly why taking advice before signing matters. If the process was flawed, you may be worth more than you’re being offered. If it was handled properly, we’ll tell you that too, honestly, so you can make an informed call.
This is a bit of a false choice, because they usually come together. But the real question people are asking is: should I just take the standard redundancy, or push for a settlement? Generally, a well-negotiated settlement agreement leaves you better off than statutory redundancy alone, because it includes extra compensation. The trade-off is that you give up your claims. Where the process was fair and the enhancement is reasonable, that’s often a sensible deal. Where the process was flawed, or the enhancement is thin, there’s usually room to do better. We’ll help you weigh it up.
Yes, and people often leave money on the table by not trying. Employers frequently have more flexibility than their first offer suggests, particularly if there are weaknesses in the redundancy process or you have other potential claims. We regularly negotiate improved packages, higher compensation, better reference wording, removal of unhelpful restrictive covenants. See negotiating a settlement agreement and how much you should get for more.
Yes, and it’s common. Many employers run a redundancy and offer a settlement agreement at the same time, giving you extra money in return for waiving your claims, including any claim that the redundancy was unfair. They’re not alternatives, they work together. The key question is whether the enhanced offer is good enough to justify giving up your rights, which depends on the size of the package and whether the redundancy process was fair.
Usually, yes, a well-negotiated settlement leaves you better off, because it includes extra compensation on top of your statutory redundancy pay. The trade-off is that you waive your right to bring claims. Where the redundancy was handled fairly and the enhancement is reasonable, that’s often a good deal. Where the process was flawed, you may have leverage to negotiate more. It’s worth getting advice before deciding.
Yes. A redundancy settlement should include your statutory redundancy pay (if you have two or more years’ service) as well as any enhanced or ex gratia payment on top. The statutory element is your legal entitlement and shouldn’t be swallowed up by the extra compensation, they’re separate. Check your agreement sets them out clearly, and that the tax treatment is right. We check this routinely.
Generally no. Once you’ve signed a valid settlement agreement, you’ve waived your right to bring claims, including unfair dismissal. That’s the whole point of it from the employer’s side. This is exactly why you should take advice before signing: if the redundancy process was flawed, you may have a claim worth more than the offer, and signing gives that up. A specialist solicitor can assess this quickly, usually within your deadline.
If you’ve been offered a settlement agreement as part of a redundancy, we’ll tell you whether it’s fair, whether the process was handled properly, and whether you can do better. We’re Darwin Gray, one of Wales’ leading employment law firms, and in most cases your employer covers the cost of our advice. You’ll deal directly with your solicitor, and as the only firm in Wales offering full Welsh language employment advice at every level, we can help in Welsh or English.
Get a free, no obligation chat with our employment team. Call 02920 829 100 or use our contact form.
Settlement agreements for employees
Disclaimer: This guide is general information, not legal advice, and employment law changes. For advice on your situation, please speak to a qualified employment solicitor.
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