Summary
From January 2027, employees are expected to gain the right to claim ordinary unfair dismissal after six months of service, instead of the current two-year qualifying period. This significant employment law change is likely to encourage many employers to review how they handle dismissals, redundancies and workplace disputes.
As a result, more employees may be offered a settlement agreement as employers look for a quicker and lower-risk way to end employment. If you’ve recently been offered a settlement agreement, it’s important to understand your rights before signing.
Key Takeaways
- The qualifying period for unfair dismissal protection is expected to reduce from 2 years to 6 months from January 2027.
- More employees will have legal protection earlier in their employment.
- Employers may increasingly use settlement agreements to resolve workplace disputes.
- Most employers contribute towards the cost of independent legal advice on a settlement agreement.
- A solicitor can explain your rights, negotiate better terms and ensure you are not signing away valuable claims.
Could the New Unfair Dismissal Rules Increase the Use of Settlement Agreements?
The planned changes to unfair dismissal rights represent one of the biggest reforms to UK employment law in recent years.
Currently, most employees need two years’ continuous service before they can bring an ordinary unfair dismissal claim. Under the proposed reforms, this qualifying period is expected to reduce to six months, giving many more employees legal protection much earlier.
For employers, this means dismissing an employee could involve greater legal risk after only a relatively short period of employment.
Because of this, many employment law specialists expect employers to make greater use of settlement agreements when ending employment.
A settlement agreement provides certainty for both parties. The employee receives a financial package and independent legal advice, while the employer gains protection against most future employment claims.
What Does This Mean for Employees?
If you’re offered a settlement agreement, it doesn’t necessarily mean you’ve done anything wrong.
Employers may simply prefer to reach an agreement rather than face the uncertainty, time and cost of a potential employment dispute.
However, you should never feel pressured to sign immediately.
Before signing, it’s worth checking:
- Is the compensation fair?
- Are your notice pay, holiday pay and bonuses included?
- Is there scope to negotiate a higher payment?
- Does the agreement contain restrictive clauses that could affect your future employment?
- Are you giving up valuable legal rights?
An employment solicitor can answer these questions and explain exactly what the agreement means for you.
Can You Negotiate a Settlement Agreement?
Yes.
Many people assume settlement agreements are offered on a “take it or leave it” basis, but that’s often not the case.
Depending on the circumstances, it may be possible to negotiate:
- A higher compensation payment.
- A better employment reference.
- Changes to confidentiality clauses.
- The wording of your departure.
- The date your employment ends.
Even where the financial offer remains the same, improving the overall terms can make a significant difference.
Do You Need a Solicitor?
Yes.
A settlement agreement is only legally valid if you receive advice from an independent solicitor or another qualified adviser.
In most cases, your employer pays or contributes towards the legal fees, meaning you can usually receive expert advice at little or no cost to you.
Your solicitor will explain the agreement in plain English, advise whether the offer is fair and negotiate improvements where appropriate.
Frequently Asked Questions
Potentially, yes. As more employees gain unfair dismissal rights after six months of service, many employers may choose settlement agreements to reduce legal risk and resolve employment issues more efficiently.
The Government has announced that the new qualifying period is expected to take effect from January 2027, although further legislation and guidance will confirm the final details.
Yes. You are under no obligation to accept the first offer. You should always take legal advice before deciding whether to sign.
In most cases, your employer will pay or contribute towards the cost of independent legal advice on the settlement agreement.
Yes. A solicitor can negotiate financial compensation, references, confidentiality clauses and other terms to help achieve a better outcome.
Speak to GLP Solicitors
If you’ve been offered a settlement agreement, our specialist employment solicitors can explain your options, review the terms and negotiate on your behalf where appropriate.
Because employers usually contribute towards legal fees, getting independent advice is often straightforward and may not cost you anything.
Need advice on a settlement agreement? Contact GLP Solicitors today before you sign.