Settlement agreement after a grievance

A grievance creates a dispute, which means an offer to settle can be made without prejudice, and it creates a risk, which is that an exit offered in response to a complaint looks like victimisation. The agreement has to be offered at the right point in the grievance process, has to deal with the complaint rather than bury it, has to stay within the limits the law now places on confidentiality about harassment and discrimination, and may need to provide for the employee to stay rather than leave. I draft the agreement for the employer for a fixed fee of £795, delivered in three working days, with a note on the conversation; a version including negotiation with the employee's adviser is £995.

Who this is for

Employers in England and Wales where an employee has raised a grievance about their treatment, a manager or a colleague, and an agreed resolution, with or without an exit, is being considered.

What matters in a settlement agreement after a grievance

The grievance as the dispute that makes the offer without prejudice

A written grievance alleging unfair treatment, discrimination or breach of contract is a dispute, so that a genuine attempt to settle it can be made without prejudice and cannot be referred to in later proceedings about that dispute, which matters because the protected conversation under section 111A of the Employment Rights Act 1996 covers only ordinary unfair dismissal and most grievances allege something else; the offer should be expressed as without prejudice and subject to contract, should relate to the grievance as raised, and should not be the employer's first response to it, because an immediate offer to pay the employee to go away is evidence of the treatment complained of.

Victimisation and the timing of the offer

An employee who has raised a grievance alleging discrimination has done a protected act under section 27 of the Equality Act 2010, and any detriment because of it, including an exit offered in response, is victimisation with uncapped compensation; the offer should therefore follow the grievance process (an investigation, a meeting, an outcome) or at least run alongside it on the employee's initiative, should be explained as a response to the dispute rather than to the complaint, and should never be accompanied by any suggestion that the employee's position is at risk because they complained; the note explains how to raise settlement without the offer itself becoming the claim.

Dealing with the grievance and settling at the same time

The agreement can settle the grievance with the employee leaving or with the employee staying (an agreed outcome, a change of manager or team, an apology, a payment for injury to feelings), and either way the employer should deal with what the grievance revealed: a manager who harassed a colleague is a problem that a settlement with the complainant does not solve, and the employer's duty to take reasonable steps to prevent harassment under the Equality Act 2010 continues after the settlement; the agreement should record that the grievance is withdrawn or concluded on the agreed terms, and the employer should record separately what it did about the underlying conduct.

Confidentiality, harassment and the terms the law now limits

Confidentiality terms in a settlement after a grievance are limited by law: nothing can prevent a protected disclosure under section 43J of the Employment Rights Act 1996, a report to the police or a regulator, or disclosure to professional advisers and immediate family; the Employment Rights Act 2025 makes non-disclosure terms void so far as they prevent a worker disclosing harassment or discrimination, on a timetable the regulations set, and the Solicitors Regulation Authority's guidance restricts what a solicitor may draft; the agreement should contain confidentiality that is proportionate (the terms and the amount, the circumstances where lawful), mutual non-derogatory terms, and the carve-outs stated in full, because an unlawful confidentiality term is unenforceable and a regulatory matter for the solicitor who drafted it.

The package, the tax and the apology

Where the employee leaves, the package comprises notice, holiday and a compensation payment within the thirty thousand pound exemption under section 403 of the Income Tax (Earnings and Pensions) Act 2003 (with notice pay taxed as earnings under section 402B), and may include a sum for injury to feelings, which is taxable where it relates to the termination and may be exempt where it relates to discrimination before and unconnected with it, a distinction the accountants should confirm; where the employee stays, a payment may be made in settlement of the grievance alone; an apology, where the employer is willing to give one, is often what the employee wants, and the agreement can contain it without an admission of liability.

The mutual terms and the ongoing relationship where the employee stays

Where the employee stays, the agreement should set the agreed changes (reporting line, team, location, duties), the review of them, the waiver of the claims arising from the grievance under section 203 of the Employment Rights Act 1996 and section 147 of the Equality Act 2010, the employee's right to raise a new grievance about new matters, and the protection from victimisation restated; where the employee leaves, the usual terms apply (an agreed reference, the return of property, the adviser's fees under section 413A of the Income Tax (Earnings and Pensions) Act 2003, restrictive covenants reaffirmed where they matter), and the agreement is drafted so that the departure does not look like the consequence of the complaint.

What it costs

Settlement agreement, £795. Drafted for your situation, with a note on how to have the conversation. Three working days.

Settlement agreement including reasonable negotiation with the employee's adviser, £995. The agreement in three working days. The negotiation then runs until the agreement is signed or it becomes clear it will not settle. Reasonable negotiation means what, in my experience, amounts to the standard back and forth on a settlement agreement. If the employee or their adviser is being unreasonable, for example by conducting themselves unprofessionally or requiring a substantial rewrite that needs material further legal advice to you, I will flag it and we will discuss how best to proceed, which may involve further fixed-fee work. That would be unusual.

Buying online forms the engagement on payment. The scope is what the settlement agreements for employers page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A bespoke settlement agreement drafted for the exit you are dealing with
• Proper waiver of the relevant statutory claims, so the agreement does what you are paying for
• Advice on the tax treatment, including the £30,000 exemption and what falls outside it
• Confidentiality, non-derogatory statements and an agreed reference
• Reaffirmation or replacement of restrictive covenants, which is often the real value
• A short note on how to open the conversation and keep it without prejudice or protected
• One round of amendments after the employee's adviser responds

What is not included

• Advising the employee, which their own adviser must do independently for the agreement to be valid
• Tribunal representation if the matter does not settle
• Payroll processing of the settlement sums
• Handling the settlement payment, since I do not hold client money

Questions I am often asked

An employee has raised a grievance about her manager. Can we offer her a settlement to leave?

Not as the first response, which looks like victimisation. Deal with the grievance, and if settlement is right, make the offer without prejudice as a response to the dispute, on her initiative where possible. The note explains how.

Can the agreement keep the harassment allegation confidential?

Within limits: whistleblowing, reports to the police and regulators and disclosure to advisers cannot be prevented, and the 2025 Act makes terms void so far as they prevent disclosing harassment or discrimination once in force. The agreement contains proportionate confidentiality with the carve-outs.

Can we settle a grievance without the employee leaving?

A grievance can be settled with the employee staying, with an agreed outcome, a payment where appropriate and a waiver of the claims arising from the grievance, and the employee's right to raise new matters preserved. The agreement is drafted for either outcome.

Related guidance and services

• Settlement agreements for employers, £795, the service this page describes
• Employment contracts and handbooks, £595
• Shareholders agreement, £995
• Anti-harassment policy
• Settlement agreement after a disciplinary process

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.