Pre Settlement Agreement Template for England and Wales

A Pre Settlement Agreement is an essential preliminary document that establishes the framework for employment termination discussions in England and Wales. Unlike a final Settlement Agreement, this document allows you to explore potential terms and conditions while maintaining 'without prejudice' protection during sensitive negotiations. You'll use this agreement to outline proposed financial packages, confidentiality terms, and other key provisions before committing to a legally binding settlement.

When do you need this document?

You'll need a Pre Settlement Agreement when facing potential redundancy situations where voluntary departures are being explored, or when workplace disputes arise that may benefit from negotiated resolution rather than formal proceedings. This document is particularly valuable during organisational restructuring, when performance issues need careful handling, or when discrimination claims are being discussed. You might also use it when exploring early retirement packages or managing the departure of senior employees where reputational considerations are paramount. The 'without prejudice' nature means you can have open discussions about settlement terms without fear that these conversations will be used against you in any subsequent employment tribunal proceedings.

Key legal considerations

You must ensure your Pre Settlement Agreement clearly states it operates under 'without prejudice' privilege to maintain negotiation protection under the Civil Evidence Act 1995. The document should outline potential financial terms including any statutory redundancy payments, notice pay, and discretionary compensation while noting these are preliminary discussions only. Confidentiality clauses need careful drafting to balance legitimate business interests with the employee's right to seek legal advice and make protected disclosures. You should include provisions about tax treatment of any proposed payments, making clear that final tax liability will be addressed in the eventual Settlement Agreement. Any discrimination-related discussions must comply with Equality Act 2010 requirements, ensuring no unfair treatment based on protected characteristics.

Legal requirements in England and Wales

Under the Employment Rights Act 1996, you must ensure the employee receives independent legal advice before any final Settlement Agreement, though this isn't required for the preliminary document. Section 203 of the Employment Rights Act 1996 sets out specific conditions for valid settlement agreements, including the requirement for legal advice, which you should reference in your Pre Settlement Agreement as a future requirement. The Equality Act 2010 Section 147 requires that settlement terms don't discriminate unfairly, and you must ensure your preliminary discussions comply with these provisions. You should follow ACAS Code of Practice guidelines on settlement agreements, ensuring fair and transparent negotiations. The Employment Tribunals Act 1996 governs how any eventual settlement will be enforced, so your preliminary agreement should acknowledge tribunal jurisdiction and include provisions about potential ACAS early conciliation requirements.