Person signing a document

Settlement agreements

The general rule is that employees cannot lawfully sign away their legal rights. Settlement agreements are an exception to this rule.

A settlement agreement is a formal written contract between an employer and an employee. Under the agreement, the employee waives their right to make a claim to a court or employment tribunal on the matters specified in the agreement. The employee waives these rights in exchange for a benefit, usually compensation and an agreed reference. Most settlement agreements include the termination of the employee's employment contract. Settlements exclude claims for accrued pension rights and, in most cases, exclude claims for personal injury.

To be valid, a settlement agreement must meet a number of strict legal requirements; crucially, the employee must have received advice from an independent adviser on the terms and effect of signing the agreement.

Circumstances where settlement agreements are used

Settlement agreements are normally proposed by employers, although employees can propose them too. In the education sector, settlement agreements are used most often where teachers are threatened with formal capability or disciplinary procedures; where employers are proposing redundancies; in cases of long-term sickness absence; or where working relationships have broken down irretrievably.

How settlement agreement is reached

When you seek advice, your caseworker will assess your case and advise you on how to achieve the best available outcome. In some cases there may be more than one outcome available to you; having been advised on the options open to you, it will be a matter for you decide on what route to take.

If you agree that your caseworker should seek to negotiate a settlement agreement on your behalf, you should keep in touch with them throughout the process. Your caseworker will ask you to read and confirm that you have read and understood the terms under which they advise you. This will include asking that you do not act contrary to their advice. Your caseworker will agree with you the proposed basic terms of the agreement, including particular proposals for any termination date, compensation and any other terms relating to your current role and future career.

There will then be a process of negotiation during which both sides make proposals and counter proposals until agreement is reached. Very occasionally the parties will recognise that an agreement is not possible.

Your caseworker will liaise with you on the final terms of the agreement. If you agree to these terms, your caseworker will send the agreement to the NEU's team of certified settlement agreement officers (CSAOs) who act as independent advisers. The role of the adviser is to advise you in writing on the terms and of the consequences of signing the agreement. You will be asked to read the advice carefully and to sign and return the agreement if you agree to the terms.

The settlement agreement becomes a legally binding document when it is signed by all parties to it.

Where an employer suggests a settlement agreement

Settlement agreements are voluntary; you do not have to agree to one. Neither employees nor employers are obliged to enter into discussions about a settlement agreement or to agree the proposed terms.

If your employer, head teacher or principal suggests a settlement agreement to you, seek immediate advice from the union.

Protected conversation

A protected conversation is the legal term for a discussion held with a view to terminating an employee’s contract on agreed terms. The details of these discussions would not be admissible in evidence to a tribunal in a subsequent claim for ordinary unfair dismissal. If your employer, head teacher or principal invites you to have a protected conversation, seek immediate advice from the union.

Timescale of a settlement agreement

The length of time that it takes to negotiate and finalise a settlement agreement will vary considerably. The first stage of the process will involve discussions and negotiations between your caseworker and your employer's representative. 

The next stage will involve the formal completion of the settlement agreement. In many cases, a settlement agreement might not be signed off until after a negotiated termination date has passed.

Your caseworker has been trained by the NEU and, as a teacher or educational professional and trade union officer, is the best person to advise and support you, and to negotiate the best deal for you. They will have a working knowledge of local schools and colleges and will have developed a relationship with employers in the area. 

Your caseworker's role is distinct from the role of the CSAO. The adviser's role is to formalise the completion of the agreement and to provide written advice to you on the terms and effect of the agreement, in particular on your rights to take a claim to a tribunal.

Employer settlement agreement benefit

The main benefit to an employer of signing a settlement agreement is that the employee will not be able to bring an employment tribunal claim about any type of claim that is listed in the agreement. A valid agreement will remove the risk of litigation for the employer.

Advantages of settlement agreements for teachers and education professionals

If you are in dispute with your employer and you wish to leave your job, a settlement agreement might be the best vehicle to secure the most favourable exit for you.

In most cases, the advantages of agreeing a settlement is that the employee is able to leave a workplace with the best chance of starting afresh in a new job. A settlement agreement can provide some certainty, a stated sum of money, a defined termination date and a suitable reference.

In some cases, employees can avoid stressful formal disciplinary or capability procedures or other assessments by agreeing a termination under a settlement agreement.

Disadvantages of a settlement agreement

Signing a settlement agreement will prevent a teacher or education professional from taking an employment claim to a tribunal.

An employer might not agree to everything that you ask for in a settlement agreement. The terms will be a matter of negotiation between your respective representatives.

If you move to a new employer, your continuous service will be broken. Some employment rights and benefits under your contract are determined by how long you have worked for your employer. Employees who move to a new employer will, in most cases, be required to re-build their service before they can benefit from statutory employment protections such as the right to claim unfair dismissal after two years' service. Access to contractual maternity and sick leave and pay might not be available from day one with a new employer. This will depend on the terms of the new employer's sickness and maternity policies.

Employers will often ask for a strict gagging or confidentiality clause that will prevent you from disclosing your settlement and its terms with anyone outside your family and advisers.

Gagging or confidentiality clause

Many settlement agreements include a gagging or confidentiality clause (also known as a non-disclosure clause or NDA). A confidentiality clause can restrict what you can say about a dispute at work and/or the terms or subject matter of the settlement agreement. In many cases, you will be prevented from disclosing this information to anyone apart from close members of your family, your advisers in the NEU or for legal or tax purposes – for example, to reveal the terms to HM Revenue & Customs (HMRC). Most clauses apply from the point that negotiations begin, and many employers will require you to confirm that you have not disclosed any relevant information before you sign the agreement.

Many confidentiality clauses impose reciprocal obligations on the employer and the employee not to make disparaging remarks about the other party.

Confidentiality clauses should not be used to cover up inappropriate behaviour, mislead or prevent someone from reporting harassment or from talking about acts of discrimination. They must not be used to prevent whistleblowing or to avoid a referral to a regulator, government agency or to the police.

The precise obligations to maintain confidentiality will be specified within the settlement agreement; you should discuss with your caseworker, what aspects of your case you would prefer to share or keep confidential. Care should be taken to understand and comply with any confidentiality clause, as a breach of confidentiality might invalidate the settlement agreement and allow the employer to claw back a compensation payment.

When you have agreed to leave your job

If you have agreed to leave your job, your caseworker will have negotiated a termination date, which will be specified in the settlement agreement.

Once the agreement is signed, your employment is treated as having ended from the termination date. Both your and your employer's obligations and entitlements under the contract of employment come to an end on this date.

You will continue to be employed by your employer until your contract is terminated. Some employers insist that employees confirm that, at the time of signing the agreement, they have neither accepted new employment nor started to work for a new employer. Seek advice from your caseworker if you wish to accept a new post or start working for another employer before your settlement agreement has been signed by all parties. You are likely to be in breach of your employment contract if you start another job before effectively bringing your current employment to an end.

Agreeing to leave your job might mean that you avoid having to attend a workplace investigation, hearing or meeting. Teachers should be aware that if their contract is terminated for reasons relating to child protection, the employer must refer the matter to the Disclosure and Barring Service (DBS) and may refer such matters to the Teaching Regulation Agency (TRA) in England or the Education Workforce Council (EWC) in Wales. Where there has been any other form of serious misconduct (eg financial or exam dishonesty), the employer may refer the matter to the TRA or the EWC. Teachers in these circumstances might avoid a workplace investigation, hearing or meeting but might nevertheless be subject to an assessment by one of the regulatory authorities. If you have left your teaching post, you may continue to work as a teacher elsewhere unless the teaching regulators have informed you otherwise.

When you do not want to leave my job

If you wish to stay in your post, you should let your caseworker know this.

Depending on the circumstances of your case, a decision not to agree to the termination of your employment may mean that you will be required to take part in a workplace procedure and/or to participate in investigations and attend hearings.

When you are if off sick

You should continue to submit fit notes to your employer during negotiations until all parties have signed the settlement agreement, even if the termination date has passed. Unless you have exhausted your sick pay entitlements, these should continue until your contract comes to an end; sick pay will not continue after the end of your employment.

Agreed reference

An agreed reference is a form of words that the employer agrees to use in the event of a request for a professional reference from a prospective employer. Positive professional references are a valuable part of settlement agreements for teachers and educational professionals.

The clauses in the settlement agreement will specify how and when the employer will use the agreed reference.

Many employers will also agree to the wording and timing of an announcement to the school community to explain your departure.

Compensation entitlement and tax

The amount of compensation paid under a settlement agreement varies widely, depending on the nature and seriousness of the dispute between the parties. Your caseworker will discuss the value of your case with you before beginning to negotiate the deal with your employer.

Your caseworker and the employer should discuss which elements of the compensation are taxable during the negotiations. The answer will depend on the purpose, the amount and the timing of the payment. Certain payments, such as redundancy payments, should be paid to you without any deduction of tax or national insurance (NI). All settlement payments are now deemed by HMRC to include compensation for notice pay, known as post employment notice pay (PENP) unless notice has been worked leading up to your termination date.

The Government’s intention is to tax, as earnings, the basic pay you would have earned had you worked out the minimum notice the employer is required to give you under your contract. Any remaining balance of the settlement payment should be paid without any deduction of tax or NI up to a limit of £30,000. The clauses in the agreement should identify which payments are intended to be subject to tax and NI.

Settlement agreement and whistleblowing

Any clause in a settlement agreement that attempts to stop a worker from blowing the whistle – otherwise known as making a protected disclosure – would be void. Such a clause would not prevent a teacher or educational professional from making a protected disclosure. If you have signed a settlement agreement, you are advised to seek advice before making a protected disclosure.

Other colleagues with the same dispute with employer

Discuss your concerns with your workplace rep. If your colleagues have the same dispute with your employer, a settlement agreement might not be the best solution. You may be advised to tackle the issue with your colleagues collectively.

Ask your rep or school or college office for copies of relevant workplace policies, for example pay policies, capability procedures, redundancy policies.

You or your rep can contact the NEU for further advice on what steps you should take. You may be advised to lodge a formal grievance or to lodge a collective grievance with your colleagues. This may resolve the issue.

If you have an issue at your workplace, discuss your concerns with your workplace rep. Your colleagues may have made similar complaints and you may be advised to tackle the issue with them collectively. If your issue is an individual one, contact the union for further advice.

Woman leaving office with box of belongings


Dismissal on grounds of redundancy is a potentially fair reason for dismissal.

Silhouette of meeting


A dismissal occurs when an employer terminates an employee’s contract of employment with or without notice.

Close up of a pen being handed to clasped hands

Constructive dismissal

Constructive dismissal is the legal term used to describe what happens when an employee resigns because their employer has broken the employment contract in a serious way.

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