What is a
A Settlement Agreement (formerly known as a Compromise Agreement) is a specific type of contract between an employer and employee under which the employee receives a financial payment in exchange for agreeing that he or she will not pursue any legal claims against the employer.
Settlement agreements are commonly used as a means of resolving disputes between an employer and employee and as a means of mutually terminating the employment relationship.
The payment made to the employee may consist of salary, contractual notice pay and a compensation payment for the termination of employment. A compensation payment may be tax free if it is less than £30,000.