Why is a tax clause included in a UK settlement agreement?

A tax clause explains how payments are treated for tax purposes and may include a tax indemnity requiring the employee to repay tax liabilities if HMRC challenges the treatment.

What is a waiver of claims clause?

A waiver of claims clause lists the legal claims the employee agrees not to bring, such as unfair dismissal, discrimination, notice pay or holiday pay claims, where applicable.

Can a settlement agreement include an agreed reference?

Yes. A settlement agreement can include an agreed reference clause setting out the wording an employer will provide to future employers or recruiters.

What should a settlement payment clause include?

A payment clause should state the amount, payment date, deductions, method of payment and whether sums are taxable, non-taxable or subject to PAYE and National Insurance.

What is a return of property clause?

A return of property clause requires the employee to return company items such as laptops, phones, documents, access cards, keys and confidential information by a stated deadline.

What is a non-derogatory statements clause?

A non-derogatory statements clause prevents parties from making negative or damaging comments about each other, often with exceptions for truthful statements required by law.

Can restrictive covenants be included in a settlement agreement?

Restrictive covenants may be restated, varied or confirmed in a settlement agreement, but they must be reasonable and enforceable under UK law.

What is the governing law clause in a UK settlement agreement?

A governing law and jurisdiction clause states which UK legal system applies and which courts will deal with disputes, such as the courts of England and Wales.

Is the clause directory a substitute for legal advice?

The directory is an information resource, not legal advice. Settlement agreements can have serious legal effects, so independent legal advice is usually required for employment-related agreements.

How is the clause directory different from a settlement agreement generator?

The clause directory explains individual clauses, while the settlement agreement generator helps create a complete document using selected terms and information.

EN-GB>Disputes>Settlement Agreement>UK Settlement Agreement Clause Directory

UK Settlement Agreement Clause Directory

Created: 10 Jun 2026

Explore this clause directory to understand common UK settlement agreement provisions and how they may apply in practice. For broader resources, visit our AI Generated British Settlement Agreement category page.

Clause Name	Purpose	Typical Balance	Key Review Points	Importance Level
Legal Waiver
Waiver Of Statutory Employment Claims	Settles specified employment tribunal and statutory claims.	Employer-Friendly	Check listed claims, adviser certificate, exclusions, and unknown claims wording.	High
Procedure
Independent Legal Advice Confirmation	Confirms the employee received required independent advice.	Neutral	Check adviser independence, certificate, insurance, and correct statutory wording.	High
Payment
Settlement Payment	States compensation payable in return for settlement.	Depends on Drafting	Check amount, gross or net basis, due date, conditions, and deductions.	High
Payment Date And Method	Sets when and how settlement sums are paid.	Neutral	Check payroll date, bank details, clearance, and trigger events.	High
Conditions Precedent To Payment	Makes payment conditional on specified employee actions.	Employer-Friendly	Check signing deadline, property return, resignation, reaffirmation, and breaches.	High
Salary And Accrued Benefits	Confirms final salary and benefits to termination.	Neutral	Check cut-off date, overtime, commission, bonus, expenses, and deductions.	High
Employment Termination
Payment In Lieu Of Notice	Pays notice instead of requiring work during notice.	Depends on Drafting	Check contractual PILON right, tax treatment, benefits, bonus, and termination date.	High
Payment
Statutory Redundancy Payment	Records any statutory redundancy entitlement paid.	Employee-Friendly	Check eligibility, age, service, weekly pay cap, and offset wording.	High
Enhanced Redundancy Payment	Provides redundancy compensation above statutory minimum.	Employee-Friendly	Check formula, contractual status, tax, repayment, and comparison with policy.	High
Accrued Holiday Pay	Pays untaken holiday accrued by termination.	Employee-Friendly	Check accrual calculation, carry-over, taken days, deductions, and tax.	Medium
Bonus Treatment	Confirms whether bonus is paid, waived, or pro-rated.	Depends on Drafting	Check discretion, targets, pro-rating, payment date, leaver status, and tax.	High
Commission Payments	Deals with earned or pipeline commission on exit.	Depends on Drafting	Check trigger, clawback, invoicing, receipts, pipeline deals, and final date.	High
Expenses Reimbursement	Repays approved business expenses incurred before termination.	Neutral	Check claim deadline, receipts, disputed items, cards, and policy compliance.	Medium
Employer Contribution To Legal Fees	Pays or contributes to the employee's settlement advice costs.	Employee-Friendly	Check amount, VAT, direct payment, invoice details, and scope of advice.	Medium
Tax
Termination Payment Tax Treatment	States intended tax treatment of termination compensation.	Depends on Drafting	Check £30,000 exemption, PENP, contractual sums, benefits, and NICs.	High
Employee Tax Indemnity	Requires employee to reimburse tax demanded from employer.	Employer-Friendly	Limit to employee tax, exclude employer NICs, require notice and defence rights.	High
Right To Deduct Tax And NICs	Allows employer to make required PAYE and NIC deductions.	Neutral	Check which sums are gross, net, taxable, and subject to PAYE.	High
Payment
Pension Contributions And Benefits	Confirms pension contributions and scheme treatment on termination.	Neutral	Check final contributions, salary sacrifice, death benefits, and scheme notices.	Medium
Shares, Options And LTIP Awards	Deals with equity rights and leaver treatment.	Depends on Drafting	Check good leaver status, vesting, exercise period, tax, and plan rules.	High
Legal Waiver
Waiver Of Contractual Claims	Settles contract, bonus, notice, and benefit claims.	Employer-Friendly	Check carve-outs for payments due, pension, personal injury, and enforcement.	High
Unfair Dismissal Claim Waiver	Settles claims for unfair dismissal.	Employer-Friendly	Check ordinary and automatic unfair dismissal claims are expressly identified.	High
Discrimination Claim Waiver	Settles discrimination, harassment, and victimisation claims.	Employer-Friendly	Check protected characteristics, injury to feelings, future claims, and exceptions.	High
Whistleblowing Detriment And Dismissal Waiver	Settles whistleblowing-related employment claims where lawful.	Employer-Friendly	Do not restrict protected disclosures check regulator and legal exceptions.	High
Unlawful Deduction From Wages Waiver	Settles claims for unpaid wages or deductions.	Employer-Friendly	Check unpaid salary, holiday, commission, expenses, and authorised deductions.	High
Working Time Claims Waiver	Settles holiday pay and working time claims.	Employer-Friendly	Check holiday pay, rest breaks, maximum hours, and opt-out history.	Medium
TUPE Claims Waiver	Settles transfer-related employment claims where applicable.	Employer-Friendly	Check transfer date, information duties, consultation, dismissal reason, and parties.	High
Collective Redundancy Consultation Waiver	Settles claims about collective redundancy consultation failures.	Employer-Friendly	Check protective award exposure, numbers affected, site, and consultation dates.	High
Personal Injury Claims Carve-Out	Preserves unknown personal injury claims from settlement.	Employee-Friendly	Check known injuries, psychiatric injury, discrimination injury, and insurer wording.	High
Accrued Pension Rights Carve-Out	Preserves accrued pension rights from general waiver.	Employee-Friendly	Check accrued rights, unpaid contributions, death benefits, and scheme claims.	High
Agreement Enforcement Carve-Out	Allows claims to enforce the settlement agreement.	Neutral	Ensure both parties can enforce unpaid sums and continuing obligations.	High
Unknown Claims Waiver	Attempts to waive claims not currently known.	Employer-Friendly	Check breadth, statutory validity, excluded claims, and future conduct.	High
Future Claims Waiver	Attempts to waive claims arising after signature or termination.	Employer-Friendly	Check enforceability, future discrimination limits, and exceptions for later breaches.	High
Confidentiality
Confidentiality Of Agreement Terms	Keeps settlement terms and payments confidential.	Employer-Friendly	Check permitted disclosures, duration, family, advisers, HMRC, and regulators.	High
Confidentiality Of Exit Circumstances	Restricts discussion of events leading to termination.	Employer-Friendly	Check scope, truthfulness, regulators, support network, and protected disclosures.	High
Confidentiality Exceptions	Allows necessary lawful disclosures despite confidentiality.	Employee-Friendly	Include advisers, HMRC, court, regulators, police, medical support, and whistleblowing.	High
Protected Disclosure Carve-Out	Prevents confidentiality wording blocking protected whistleblowing disclosures.	Employee-Friendly	Ensure wording permits protected disclosures to prescribed persons and advisers.	High
Non-Derogatory Statements	Prevents damaging comments about the other party.	Depends on Drafting	Check mutuality, named managers, truthful evidence, regulators, and social media.	Medium
Agreed Announcement	Controls internal or external wording about departure.	Neutral	Attach exact wording, audience, timing, approvals, and manager briefing.	Medium
Reference
Agreed Reference	Provides agreed reference wording for future employers.	Employee-Friendly	Attach wording, cover dates, role, reason, performance, and consistency.	High
No Oral References	Prevents informal references inconsistent with agreed wording.	Employee-Friendly	Check HR-only process, managers, recruitment agencies, and verbal enquiries.	Medium
Regulatory Reference Compliance	Preserves mandatory regulatory reference obligations.	Depends on Drafting	Check FCA, PRA, safeguarding, education, healthcare, and accuracy duties.	High
Employment Termination
Termination Date	Sets the employment end date.	Neutral	Check continuity, notice, benefits, bonus, holiday, and restrictive covenant start date.	High
Resignation From Employment	Records voluntary resignation rather than dismissal.	Employer-Friendly	Check effect on benefits, references, UC, insurance, and unfair dismissal position.	High
Garden Leave	Keeps employee employed but away from work during notice.	Employer-Friendly	Check pay, benefits, duties, contact limits, holiday, and covenant offset.	Medium
Handover Obligations	Requires orderly transfer of work and information.	Employer-Friendly	Check scope, deadlines, access, extra work, confidentiality, and payment linkage.	Medium
Procedure
Withdrawal Of Grievances And Appeals	Ends internal grievances, appeals, or disciplinary processes.	Employer-Friendly	Check regulatory issues, protected disclosures, references, records, and remedies.	Medium
Withdrawal Of Tribunal Claim	Requires existing employment tribunal claims to be withdrawn.	Employer-Friendly	Check dismissal or withdrawal terms, timing, ACAS COT3 overlap, and payment trigger.	High
Post-Termination Restriction
No Re-Employment Or Re-Engagement	Prevents future applications or work with employer group.	Employer-Friendly	Check group scope, clients, agencies, discrimination risk, and reasonableness.	Medium
Reaffirmation Of Restrictive Covenants	Confirms existing post-termination restrictions continue.	Employer-Friendly	Check original contract, duration, scope, enforceability, and garden leave offset.	High
New Post-Termination Restrictions	Introduces new covenants as part of settlement.	Employer-Friendly	Check fresh consideration, reasonableness, duration, geography, clients, and role.	High
Non-Compete Restriction	Restricts working for competitors after termination.	Employer-Friendly	Check duration, business scope, territory, role, carve-outs, and consideration.	High
Non-Solicitation Of Clients	Stops approaching clients or prospects after exit.	Employer-Friendly	Check client period, personal dealings, prospects, group clients, and duration.	High
Non-Dealing With Clients	Stops accepting work from protected clients.	Employer-Friendly	Check passive approaches, client list, duration, territory, and legitimate interest.	High
Non-Poaching Of Employees	Prevents recruiting colleagues after termination.	Employer-Friendly	Check seniority, contact threshold, indirect poaching, duration, and group scope.	Medium
Non-Solicitation Of Suppliers	Restricts interference with key suppliers or contractors.	Employer-Friendly		Medium
Property and Information
Trade Secrets And Confidential Information	Preserves duties not to misuse confidential business information.	Employer-Friendly	Check definition, public domain, employee know-how, duration, and exceptions.	High
Return Of Company Property	Requires return of devices, documents, cards, and equipment.	Employer-Friendly	Check list, deadline, delivery method, personal data, and payment condition.	Medium
Deletion Of Company Data	Requires deletion of employer data from personal devices.	Employer-Friendly	Check backups, lawful retention, personal data, litigation holds, and certification.	Medium
Intellectual Property Assignment	Confirms employer ownership of work-related IP.	Employer-Friendly	Check inventions, moral rights, pre-existing works, future assistance, and payment.	High
Data Protection And Privacy	Addresses processing of personal data linked to settlement.	Neutral	Check retention, references, DSARs, confidentiality, lawful basis, and special category data.	Medium
Data Subject Access Request Position	Deals with existing or future DSARs.	Depends on Drafting	Do not unlawfully waive data rights check withdrawal, response, and exemptions.	Medium
Procedure
Reaffirmation Certificate	Requires fresh confirmation after termination or notice period.	Employer-Friendly	Check second advice need, payment delay, changed facts, and new claims.	Medium
Employee Warranties	Employee confirms facts relied on by employer.	Employer-Friendly	Check no claims filed, no new job, no misconduct, and repayment consequences.	High
Employer Warranties	Employer confirms payment and authority assurances.	Employee-Friendly	Check authority, no disciplinary record changes, reference process, and payments.	Medium
Repayment On Breach	Requires repayment if employee breaches key obligations.	Employer-Friendly	Check proportionality, genuine loss, notice, cure period, and excluded breaches.	High
Costs And Expenses	Allocates legal and other costs of the settlement.	Neutral	Check adviser fee cap, VAT, litigation costs, enforcement costs, and invoices.	Medium
Entire Agreement	Prevents reliance on prior discussions not in the agreement.	Neutral	Ensure all promises on payments, reference, benefits, and property are included.	High
Variation In Writing	Requires changes to be agreed formally in writing.	Neutral	Check email validity, authorised signatories, and post-signature side agreements.	Medium
Severance	Keeps the agreement effective if one clause is invalid.	Neutral	Check whether invalid covenants can be narrowed and payment remains due.	Medium
Governing Law And Jurisdiction	Sets applicable law and court jurisdiction.	Neutral	Check England and Wales, Scotland or Northern Ireland law and forum.	Medium
Third Party Rights	Controls enforcement by group companies, officers, or advisers.	Depends on Drafting	Check protected parties, group companies, consent to vary, and employee rights.	Medium
Counterparts And Electronic Signature	Allows separate copies and electronic signing.	Neutral	Check signature blocks, adviser certificate, dating, authority, and deed requirements.	Low
Without Prejudice And Subject To Contract	Protects settlement negotiations until final agreement.	Neutral	Check whether correspondence is admissible and when binding obligations arise.	Medium
Protected Conversation Acknowledgement	Records pre-termination settlement discussion protections.	Employer-Friendly	Check improper behaviour, discrimination claims, and scope beyond unfair dismissal.	Medium
ACAS Settlement Agreement Code Compliance	Reflects good practice for settlement agreement discussions.	Neutral	Check reasonable consideration time, no pressure, adviser access, and wording.	Medium
Other
Outplacement Support	Provides career coaching or job-search support.	Employee-Friendly	Check provider, value, expiry, transferability, tax, and confidentiality.	Low
Payment
Private Medical Insurance Continuation	Extends or ends private medical insurance cover.	Employee-Friendly	Check cover period, dependants, pre-existing claims, tax, and insurer rules.	Medium
Company Car Or Car Allowance	Deals with return of car or continued allowance.	Depends on Drafting	Check return date, damage, fuel card, allowance, tax, and insurance.	Medium
Property and Information
Mobile Phone And Number Transfer	Handles phone return or transfer of number.	Depends on Drafting	Check ownership, number portability, data wiping, costs, and contacts.	Low
Confidentiality
Social Media And LinkedIn Updates	Controls online statements about departure and employer.	Employer-Friendly	Check update wording, timing, client contacts, endorsements, and non-derogatory scope.	Low
Other
Future Cooperation	Requires help with investigations, litigation, or handover issues.	Employer-Friendly	Check time limits, expenses, privilege, legal advice, and conflicts.	Medium
Property and Information
Search And Retrieval Of Employer Materials	Allows checks for retained confidential documents or data.	Employer-Friendly	Check privacy, device scope, supervision, personal material, and data protection.	Medium
Legal Waiver
No Admission Of Liability	States settlement is not an admission of wrongdoing.	Employer-Friendly	Check consistency with reference, announcement, grievances, and regulatory duties.	Medium
Payment
Set-Off And Deductions	Allows sums owed by employee to be deducted.	Employer-Friendly	Check loans, training fees, overpayments, consent, payroll limits, and notice.	Medium
Training Costs Repayment	Deals with repayment or waiver of training costs.	Depends on Drafting	Check original agreement, tapering, reason for exit, deductions, and waiver.	Medium
Employee Loan Repayment	Sets repayment terms for outstanding employee loans.	Depends on Drafting	Check balance, interest, due date, deductions, write-off, and tax.	Medium
Legal Waiver
Family Leave Claims Waiver	Settles maternity, paternity, adoption, shared parental, or parental leave claims.	Employer-Friendly	Check pay, leave, redundancy priority, discrimination, and detriment claims.	High
Health And Safety Claims Waiver	Settles employment claims linked to health and safety detriment or dismissal.	Employer-Friendly	Check automatic unfair dismissal, detriment, personal injury, and regulator exceptions.	High
Trade Union And Worker Representative Claims Waiver	Settles claims involving union membership or representative activities.	Employer-Friendly	Check automatic unfair dismissal, detriment, consultation roles, and protective awards.	High
National Minimum Wage Claims Waiver	Settles claims for minimum wage arrears where lawful.	Employer-Friendly		High
Payment
Statutory Sick Pay Position	Confirms SSP paid or outstanding at termination.	Neutral		Medium
Employment Termination
Immigration And Right To Work Notifications	Addresses sponsored worker or right to work consequences of termination.	Depends on Drafting		High
Resignation From Directorships And Offices	Requires resignation from company offices and appointments.	Employer-Friendly		Medium
Other
Director Indemnity And D&O Insurance	Preserves protection for acts as director or officer.		Check policy period, run-off cover, exclusions, indemnity limits, and claims notice.	High
Reference
Safeguarding And DBS Disclosure Compliance	Preserves mandatory safeguarding and DBS reporting duties.	Neutral		High
Professional Regulator Notifications	Allows or requires reporting to professional regulators.	Neutral		High

What Clauses Matter Most In A UK Settlement Agreement?

The highest-risk clauses are usually the waiver of employment claims, settlement payment, tax indemnity, confidentiality, reference, and any post-termination restrictions. These directly affect whether the employee can bring tribunal or court claims, how much money is received net of tax, what can be said after signing, and whether future work is restricted.

Why Must A UK Settlement Agreement Include Independent Legal Advice?

Most statutory employment claims can only be validly settled through a compliant settlement agreement if the employee receives advice from a relevant independent adviser and the statutory conditions are met. The agreement should identify the adviser, confirm insurance or indemnity cover, and specify the claims being settled.

How Should Payment And Tax Clauses Be Checked?

Payment clauses should state exact gross and net amounts, payment dates, deductions, pension treatment, legal fee contribution, and whether payment is conditional on signing, return of property, resignation, or reaffirmation. Tax clauses should be reviewed carefully because payments over the statutory termination payment exemption, contractual payments, PILON and certain benefits may be taxable, and broad tax indemnities usually shift HMRC risk to the employee.

What Confidentiality And Reference Terms Are Most Practical?

Confidentiality clauses should include workable exceptions for legal advisers, tax authorities, immediate family, regulators, protected disclosures and legal obligations. Reference clauses should attach the agreed wording, say whether oral references are allowed, and require consistency across HR, managers and third-party reference providers.

When Are Restrictive Covenants A Concern?

Settlement agreements often restate or vary non-compete, non-solicitation, non-dealing and confidentiality obligations. Employees should check duration, geographic scope, client coverage, carve-outs for existing contacts, and whether fresh consideration is given for any new or expanded restriction.

UK Settlement Agreement Clause Directory

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FAQs

What is a UK Settlement Agreement Clause Directory?

A UK Settlement Agreement Clause Directory is a reference page that explains common clauses used in settlement agreements in England, Wales, Scotland and Northern Ireland. It helps users understand what each clause is for before generating a document.

How can a clause directory help with a settlement agreement?

What clauses are usually included in a UK settlement agreement?

What clauses are required for a UK employment settlement agreement to be valid?

What does a confidentiality clause do in a settlement agreement?

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