A settlement agreement is a special kind of contract between an employee
and an employer
. It’s an exception to the general rule that a person cannot give up his or her rights to make a claim in an employment tribunal or a court.
An agreement is a sensible way of resolving a dispute but any attempt to do this without following the rules on settlement agreements won’t work and the arrangement will be unenforceable - a good reason why you should seek legal advice early.
The purpose of a settlement agreement is to record how the terms of employment will end or a dispute will be resolved. Those terms are usually that the employer will pay a sum of money in return for the employee giving up rights to make the employment-related claims set out in the agreement.