All you Need to Know about Unfair Dismissal and Settlement Agreements

If you’ve been dismissed unfairly, you might be entitled to a settlement agreement, which allows you to receive compensation without the stress of an employment tribunal. This legally binding contract helps both employees and employers reach a resolution without drawn-out legal battles. Let’s dive into what a settlement agreement is, how it applies to unfair dismissal, and what you should consider before accepting an offer.

What is a Settlement Agreement?

A settlement agreement, previously known as an unfair dismissal compromise agreement, is a legal contract between an employer and employee. It is typically used when an employment relationship ends, allowing both parties to settle disputes, including those related to unfair dismissal.

In exchange for compensation or other agreed benefits, the employee waives their right to take legal action against the employer. This agreement helps both sides avoid the time, cost, and uncertainty of an employment tribunal.

Why Would an Employer Offer a Settlement Agreement?

Employers may offer a settlement agreement for several reasons, including:

• Unfair dismissal – If an employee has been let go without a fair reason or due process.
• Redundancy – When a role is no longer needed, and the employer wants to avoid disputes.
• Discrimination claims – To resolve potential claims without legal proceedings.
• Workplace disputes – To settle contractual disagreements over pay, benefits, or notice periods.

A settlement agreement ensures a clean break, often including financial compensation and agreed terms like a job reference or confidentiality clauses.

Can You Get a Settlement Agreement for Unfair Dismissal?

Yes, if you believe you were unfairly dismissed, you may be eligible for a settlement agreement. Employers often offer these agreements to avoid costly and time-consuming legal disputes.

A dismissal is considered unfair if:

• You were fired without a valid reason.
• The correct procedure (such as disciplinary steps) wasn’t followed.
• You were dismissed due to discrimination, whistleblowing, or asserting employment rights.

In these cases, a settlement agreement can provide financial security and a quicker resolution than a tribunal claim. However, you should always seek legal advice before signing, as a solicitor can negotiate better terms on your behalf.

Automatic Unfair Dismissals

Some dismissals are automatically classed as unfair, meaning employers cannot justify them. These include being fired for:

• Pregnancy or maternity leave.
• Whistleblowing (reporting illegal or unethical company practices).
• Requesting your legal rights, such as minimum wage or holiday pay.
• Trade union membership or activities.

If your dismissal falls into one of these categories, your case may be even stronger, increasing your chances of securing a fair settlement agreement.

Should You Accept an Unfair Dismissal Settlement Agreement?

Before accepting an offer, ask yourself:

• Is the compensation fair? Compare the offer with what you could receive from an employment tribunal.
• Does it consider lost earnings? You may be entitled to compensation for wages you would have earned had you not been dismissed.
• Will it affect your future career? Some agreements include restrictive clauses, so make sure you’re not limiting your job prospects.
• Could you negotiate a better deal? A solicitor can help increase your payout or secure better terms, such as a positive job reference or an extended notice period.

Since signing a settlement agreement means giving up your right to take legal action, it’s crucial to review it carefully before agreeing.

What is the average payout for unfair dismissal uk?

Compensation for unfair dismissal settlement agreement in the UK consists of two parts:

• Basic Award – Based on age, length of service, and weekly pay. As of April 2024, the maximum basic award is £21,000.
• Compensatory Award – Covers lost wages and other financial losses. The maximum compensatory award is £115,115 or 52 weeks’ pay (whichever is lower).

The average payout for unfair dismissal in the UK is around £14,000, but this varies based on circumstances. Cases involving discrimination often lead to higher settlements.

Get settlement agreement legal advice

A settlement agreement can be a valuable option, but don’t rush into signing without legal advice. An experienced solicitor can:

• Review your offer and ensure it’s fair.
• Negotiate better compensation or additional benefits.
• Protect your rights and make sure you’re not accepting unfavourable terms.

If you’ve been unfairly dismissed and need guidance, contact our settlement agreement legal advice team. We’ll help you secure the best possible outcome.