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Settlement agreement cover letter template

£ 15

Use this model letter when you have reached a settlement agreement with an employee who will be leaving your employment as a result, to enclose the settlement agreement.

The reasons for the exit should relate to unsatisfactory conduct, attendance or performance issues on the part of the employee.

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How long to understand and prepare this letter?
10 mins
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settlement agreement cover letter template

What is a Settlement agreement cover letter?

A Settlement Agreement cover letter is typically used to introduce and accompany a Settlement Agreement, which is a legally binding contract between an employer and employee that sets out the terms of the employee's departure from the company, usually in exchange for a financial settlement.

The purpose of a Settlement Agreement cover letter is to provide context and explain the terms of the agreement to the employee, as well as to provide instructions on how to proceed with signing the agreement. The cover letter should typically include:

  • A brief explanation of the circumstances leading to the agreement

  • A summary of the terms of the agreement, including any financial settlement or other benefits offered

  • An explanation of the legal implications of signing the agreement

  • Any relevant deadlines or other important information

  • Contact information for any legal representatives who may be involved in the process

In summary, a Settlement Agreement cover letter is an important document that helps to ensure that the terms of the agreement are clearly communicated to the employee, and that the agreement is executed in a legally valid manner.

The settlement offer must be a genuine attempt to settle an existing dispute, i.e. a situation where you or the employee has brought, or might reasonably be expected to bring, legal action against the other and that this situation is ongoing at the time this settlement offer is made.

An existing dispute is likely to be true if, for example, you've previously warned the employee that unless their performance or behaviour improves, disciplinary action will be taken, which could result in their dismissal, or an employment relationship has already ended and the employee has taken action against your business, or has indicated that they intend to do so.

Issued by who, to whom
Who should issue this letter, and to whom?
The Employer (you) to the Employee
Applicable legal jurisdiction
In which jurisdiction can this letter be used?
Great Britain & NI (United Kingdom)
  • Employment Rights Act 1996: Provides the legal framework for settlement agreements and the documentation associated with them.

  • Equality Act 2010: Ensures that the language and content of the cover letter do not breach anti-discrimination laws or prejudice fairness.

  • The ACAS Code of Practice on Settlement Agreements: Offers guidance on communication and documentation related to settlement agreements, including cover letters.

  • Data Protection Act 2018 (incorporating GDPR): Requires that personal data within the cover letter complies with data protection principles.

  • Common Law Principles: Legal principles and precedents guide the content and context of settlement agreement cover letters.

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Settlement agreement cover [Delete this line]

[Company name]

[Sender address]



[Recipient name]

[Recipient address]


Dear [Recipient first name],


Without Prejudice and subject to S111A Employment Rights Act 1996

We are writing to you regarding the proposed settlement agreement that has been offered to you. This agreement has been offered to you following discussions between you and your employer, [Company Name], and sets out the terms and conditions of your departure from the company.

As you are aware, the purpose of this settlement agreement is to resolve any potential disputes between you and [Company Name] and to ensure a smooth and amicable departure from the company. We believe that this settlement agreement represents a fair and reasonable offer, and we hope that you will agree to its terms.

The key terms of the agreement are as follows:

  • [Insert brief summary of the terms of the agreement, including any financial settlement or other benefits offered]

We want to emphasise that the settlement agreement is a legally binding document, and that by signing it, you will be waiving your right to bring any claims against [Company Name] in relation to your employment or its termination. We advise you to seek independent legal advice before signing the agreement, and we will pay up to £[amount] to your legal represenative should you choose to do so. The company requires that the person giving advice signs a letter in the form attached in the first schedule to the agreement.

We would be grateful if you could let us know whether you are willing to accept the proposed settlement agreement by [Insert deadline for response]. If you have any questions or concerns about the agreement or the process, please do not hesitate to contact us. 

If the terms of the settlement agreement are acceptable, I will arrange for the organisation to make payment to you in accordance with the terms of the agreement.

Thank you for your cooperation and understanding in this matter.

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Yours [faithfully | sincerely],



[Sender name]

[Sender job title]

[Sender telephone]
[Sender email]

What communication / process sequence is this part of?

Previous step
Protected conversation script

Our Protected Conversation Script Template facilitates sensitive discussions, allowing employers to explore options without risk of legal recourse.

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Settlement agreement cover letter template
Next step
Settlement agreement template

Our Settlement Agreement Template facilitates fair and clear resolution, easing legal processes for both parties involved in employment separation.

Why buy our Settlement agreement cover letter template?

  • It's easily editable and implementable, saving you time and money
  • It's designed by CIPD accedited Chartered HR practitioners with operational experience in this area
  • You will maintain compliance with ACAS guidelines, legislation, and industry best practices
What other advantages does buying from offer?
  • Email notifications for any updates made to this template or its accompanying materials
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