Settlement agreements in employment—practical and tax issues

Copyright © 2025 LexisNexis
Published by a LexisNexis Employment expert
Practice notes
In-house

Settlement agreements in employment—practical and tax issues

Copyright © 2025 LexisNexis

Published by a LexisNexis Employment expert

Practice notes
In-house
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STOP PRESS: The Victims and Prisoners Act 2024 (Commencement No 6) Regulations 2025, SI 2025/616 came into force on 1 June 2025, bringing into force section 17 of the Victims and Prisoners Act 2024 from 1 October 2025, which renders non-disclosure Agreements (NDAs) unenforceable if they restrict victims of crime from making certain ‘permitted disclosures’. The Ministry of Justice has also published guidance on the changes to NDAs, see: LNB News 02/06/2025 28. This Practice Note will be updated to reflect the forthcoming changes in due course.

This Practice Note examines the practical issues that typically arise relating to an employment Settlement agreement (formerly known as a Compromise agreement). It also outlines the tax issues that are likely to be relevant, and refers to our related Practice Notes for further detail.

For information on the legal Requirements (ie the conditions regulating settlement agreements) that must be met in order for a settlement agreement to be binding and valid to settle statutory employment claims, see Practice Note: Settlement agreements in employment—legal requirements.

Parties to the agreement

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Settlement definition
What does Settlement mean?

The payment or collection of proceeds after trading a security. Settlement usually takes place some time after the deal and price are agreed.

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