Settlement Agreement

In recruiter context

Formerly called a 'compromise agreement', renamed in 2013. UK law requires you to take independent legal advice before signing — and the employer typically pays £500-£1,500 toward the legal fee. Settlement agreements are common in redundancies, sensitive exits, and grievance resolutions. The first £30,000 of an ex-gratia termination payment is tax-free (PILON and accrued benefits are taxed normally). The candidate-side mistake to avoid: assuming the first offer is final. Specialist employment solicitors recover their fee on the negotiation alone — there's typically 10-25% headroom on the ex-gratia portion if you push.