ACAS Guide on Settlement Agreements: what is it and what effect does it have?

Chris Hadrill, the partner in the employment team at Redmans, analyses the “ACAS Guide on Settlement Agreements”: what is it, and what effect does it have?

Further reading: our guide on settlement agreements

What is the ACAS Guide on Settlement Agreements?

The ACAS Guide on Settlement Agreements is, to put it bluntly, a guide to settlement agreements published by ACAS. It contains guidance for employers and employees on the purpose and form of settlement agreements, as well as the admissibility of discussions relating to the offer of a settlement agreement (or the offer of settlement terms). It also contains a helpful explanation of who can enter into a settlement agreement, why an employer and an employee may wish to enter into a settlement agreement, and what the risks and benefits of completing a settlement agreement are.

What effect does the ACAS Guide on Settlement Agreements have?

The ACAS Guide on Settlement Agreements is intended to be a guide to “good employment practice”, rather than stipulating legal requirements for settlement agreements. For example, the ACAS Guide specifies that an employee should be allowed up to ten days in which to consider the offer of a settlement agreement as a matter of good practice; in reality, there is no legal requirement for employers to provide an employee with a reasonable amount of time in which to consider the terms of the agreement (although it is normally recommended that a reasonable period of time is given to the employee for various reasons).

If an employer is seeking to pressure you into signing a settlement agreement without giving you a reasonable period of time in which to consider the terms of the agreement then you should flag up to your employer what the ACAS Guide recommends in terms of timelines, and seek an extension of time in which to consider the terms.

How can the ACAS Guide on Settlement Agreements be helpful?

The ACAS Guide on Settlement Agreements can be extremely helpful – it is an easily-digestible guide to what an employee or an employer may want to consider when agreeing settlement terms (whether this is in relation to the termination of the employment relationship or not). It also contains some helpful templates for letters that an employee and/or an employer may wish to use when entering into and negotiating settlement agreements.

However, although the ACAS Guide on Settlement Agreements can be helpful, it is always advisable to obtain independent legal advice from a legal adviser (such as, for example, a specialist employment solicitor) – obtaining such advice will allow you to understand exactly what you’re signing, how the agreement can be improved, and what steps are necessary to finalize the settlement agreement (should you wish to sign it). Your employer will normally pay for this legal advice, and you’ll therefore normally have access to specialist legal advice on your settlement agreement with no direct cost to you.

The ACAS Guide on Settlement Agreements can be found here.