If you have been offered a settlement agreement by your employer, or you are an employer considering one, The McKinstry Company’s employment law team in Ayr can help. We act for both employees and employers across Ayrshire and the wider west of Scotland, and settlement agreements are one of the areas of employment law we deal with most often.

This article explains what a settlement agreement is, why independent legal advice is a legal requirement, and how our fees usually work — including why, in most cases, an employee taking advice from us on a settlement agreement will not be left out of pocket.

What is a Settlement Agreement?

A settlement agreement (formerly known as a compromise agreement) is a legally binding contract between an employer and an employee, most commonly used to end the employment relationship on agreed terms. In exchange for a payment — and often other terms, such as an agreed reference or confidentiality — the employee agrees not to pursue certain claims against the employer in an employment tribunal or court.

Settlement agreements are commonly used in situations including:

• Redundancy and restructuring exercises
• Disciplinary, performance or capability concerns
• Disputes following grievances or workplace investigations
• Departures following a breakdown in working relationships
• Negotiated exits agreed amicably between employer and employee

Why You Need Independent Legal Advice

For a settlement agreement to be legally valid and binding under UK employment law, the employee must receive advice from a relevant independent adviser — such as a qualified solicitor — on the terms and effect of the agreement, and in particular its effect on their ability to bring a claim before an employment tribunal. Without this advice, the agreement will not be effective, and the employee could still be entitled to pursue a claim.

This requirement exists to protect employees, ensuring that anyone signing away valuable legal rights properly understands what they are agreeing to. It is not simply a box-ticking exercise: a good adviser will review the figures, check the terms are fair and complete, identify anything missing or unclear, and where appropriate, negotiate improvements before the agreement is signed.

How We Can Help

FOR EMPLOYEES

We regularly advise employees across Ayrshire on settlement agreements offered by their employer. Our role is to make sure you fully understand the agreement, that the terms are fair, and that nothing has been overlooked. Where appropriate, we will raise queries or seek improved terms with your employer or their solicitors before you sign.

FOR EMPLOYERS

We also act for employers throughout Ayrshire, preparing settlement agreements that are clear, properly drafted and tailored to the circumstances — whether that is a single departure or a wider redundancy exercise. Getting the agreement right at the outset reduces the risk of later dispute and helps both parties reach a clean, certain conclusion.

Our Fees: Usually No Cost to the Employee

A common concern for employees is the cost of taking legal advice at what can already be a difficult and uncertain time. In practice, this is rarely an issue.

It is standard practice for an employer offering a settlement agreement to agree to pay a contribution towards the employee’s reasonable legal costs of obtaining advice on its terms. This is usually set out in the agreement itself, often in the region of a few hundred pounds plus VAT, and is intended to cover the cost of the independent advice the law requires the employee to take.

Where we are instructed to advise on a settlement agreement, we will usually restrict our fee to the contribution offered by the employer, so that in straightforward cases an employee is not left paying anything from their own pocket simply for the legal advice required to make the agreement binding. We will always confirm this clearly with you at the outset, before any work begins.

Why Choose The McKinstry Company

• An experienced employment law team based in Ayr, serving clients across Ayrshire and the west of Scotland
• Practical, clear advice — explained in plain English, not legal jargon
• Experience acting for both employees and employers, giving us a rounded understanding of settlement negotiations
• Prompt turnaround — settlement agreements often come with tight deadlines, and we work efficiently to meet them
• Straightforward fee arrangements, with costs confirmed before any work begins

Get in Touch

If you have been given a settlement agreement to sign, or you are an employer looking to put one in place, contact our employment law team at The McKinstry Company in Ayr today. We will arrange a prompt appointment, often within 24 hours, in recognition of the tight deadlines settlement agreements usually carry.