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Pre Settlement Agreement for the United Kingdom

Pre Settlement Agreement Template for England and Wales

A Pre Settlement Agreement is a formal document used in England and Wales to outline proposed terms for terminating employment relationships before they are made legally binding. It sets out potential financial compensation, benefits, and mutual obligations while maintaining confidentiality and 'without prejudice' status. The document serves as a framework for negotiation and typically includes provisions for payment terms, tax treatment, and future references.

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Pre Settlement Agreement

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What is a Pre Settlement Agreement?

The Pre Settlement Agreement is a crucial preliminary document in England and Wales, used when parties are negotiating the termination of employment. It serves as a framework for discussions before entering into a legally binding Settlement Agreement. This document is particularly valuable when managing sensitive exits, restructuring, or resolving workplace disputes. The Pre Settlement Agreement typically includes proposed financial terms, confidentiality provisions, and other key terms while maintaining 'without prejudice' status to protect both parties during negotiations.

What sections should be included in a Pre Settlement Agreement?

1. Parties: Details of employer and employee

2. Background: Context of employment and circumstances leading to settlement

3. Definitions: Key terms used throughout the agreement

4. Settlement Terms: Core financial and practical terms of settlement

5. Confidentiality: Terms regarding non-disclosure of agreement and its terms

6. Tax Indemnity: Employee's responsibility for tax on settlement payments

What sections are optional to include in a Pre Settlement Agreement?

1. Reference Provision: Terms regarding future employment references - include when agreed as part of settlement package

2. Post-termination Restrictions: Non-compete and other restrictive covenants - include when existing restrictions are being varied or new ones added

3. Legal Costs: Contribution to employee's legal fees - include when employer agrees to contribute to legal costs

4. Outplacement Support: Terms of career transition assistance - include when outplacement services are part of package

What schedules should be included in a Pre Settlement Agreement?

1. Schedule 1: Claims: List of statutory and contractual claims being settled

2. Schedule 2: Payment Terms: Detailed breakdown of settlement payments

3. Appendix 1: Adviser's Certificate: Independent legal adviser's confirmation of advice given

4. Appendix 2: Reference Template: Agreed form of reference where applicable

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Ƶ

Cost

Free to use
Relevant legal definitions






















Clauses

























Industries

Employment Rights Act 1996: Primary legislation governing employment rights, particularly sections relating to termination of employment, statutory rights, and requirements for valid settlement agreements under Section 203

Equality Act 2010: Key legislation ensuring protection against discrimination and setting requirements for settlement agreements under Section 147, ensuring settlement terms don't discriminate unfairly

Civil Evidence Act 1995: Legislation governing 'without prejudice' communications in settlement negotiations

Employment Tribunals Act 1996: Legislation covering jurisdiction and enforcement of settlement agreements in employment tribunals

ACAS Code of Practice on Settlement Agreements: Best practice guidelines and procedural requirements for settlement agreements, including recommended timeframes and processes

Common Law Principles: Legal principles regarding contract formation, consideration, and misrepresentation that apply to settlement agreements

Data Protection Act 2018 and UK GDPR: Legislation governing the handling of personal data and privacy considerations in settlement agreements

Income Tax (Earnings and Pensions) Act 2003: Tax legislation determining the treatment of payments made under settlement agreements, including distinctions between taxable and non-taxable payments

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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