Is a Settlement Agreement Better Than a Tribunal?
By Solidaire Solicitors – Employment Law Specialists
If you are involved in a workplace dispute, you may be wondering:
“Is a settlement agreement better than going to an employment tribunal?”
In many UK cases, a settlement agreement can be a faster, safer, and less stressful option — but it is not always the best choice. This article explains the key differences, pros and cons, and when each option makes sense, so you can decide what is right for you.
What Is a Settlement Agreement?
A settlement agreement is a legally binding agreement between an employer and an employee. The employee agrees not to bring certain legal claims (such as unfair dismissal or discrimination) in return for:
Compensation
An agreed reference
A clean and confidential exit
You must receive independent legal advice before signing.
What Is an Employment Tribunal?
An employment tribunal is a legal process where an employee brings a claim against an employer. A tribunal judge decides whether the claim succeeds and how much compensation (if any) should be awarded.
Tribunal claims can include:
Unfair dismissal
Discrimination
Whistleblowing
Redundancy disputes
Settlement Agreement vs Tribunal: Key Differences
| Factor | Settlement Agreement | Employment Tribunal |
|---|---|---|
| Time | Weeks | 12–18 months (or more) |
| Stress | Low | High |
| Certainty | Guaranteed outcome | Risk of losing |
| Compensation | Negotiated | Judge decides |
| Confidentiality | Yes | No |
| Legal costs | Usually paid by employer | Usually not recoverable |
When a Settlement Agreement Is Better Than a Tribunal
✅ 1. When You Want a Quick Resolution
Tribunal cases can take over a year. A settlement agreement allows you to:
Receive compensation quickly
Move on with your career
Avoid lengthy legal proceedings
✅ 2. When You Want Certainty
With a settlement agreement:
You know exactly how much you will receive
There is no risk of losing your claim
Payments are agreed in advance
At tribunal, there is no guarantee of success, even with a strong case.
✅ 3. When You Want Less Stress
Tribunals involve:
Legal documents and deadlines
Witness statements
Cross-examination
Many employees prefer settlement to avoid the emotional and mental pressure.
✅ 4. When the Offer Is Fair
If the settlement offer is:
Close to what you could realistically win at tribunal
Tax-efficient
Includes legal fees and a reference
Then settling is often the sensible option.
When an Employment Tribunal May Be Better
❌ 1. When You Have a Strong, High-Value Claim
Tribunal may be better if you have:
Strong discrimination claims
Whistleblowing protection
Automatic unfair dismissal
These claims are uncapped, meaning compensation could exceed settlement offers.
❌ 2. When the Settlement Offer Is Too Low
You should not accept a settlement if:
The compensation is far below tribunal value
Notice pay or bonuses are missing
The employer refuses to negotiate
❌ 3. When You Want a Public Judgment
Tribunal decisions are public. Some employees want:
A formal ruling
Accountability
Legal precedent
Settlement agreements are confidential and do not admit fault.
Compensation: Settlement vs Tribunal
Settlement agreements: Negotiated, often £10,000–£30,000 in average cases
Tribunal awards: Can be higher, but also zero if you lose
💡 Many employers settle to avoid tribunal risk — giving employees leverage to negotiate.
Tax Considerations
Settlement compensation is often tax-free up to £30,000
Tribunal awards may be taxed differently depending on the type of award
Correct tax wording is essential in settlement agreements
So, Is a Settlement Agreement Better Than a Tribunal?
In most cases, yes — but not always.
A settlement agreement is usually better if you want:
✔ Speed
✔ Certainty
✔ Less stress
✔ Guaranteed compensation
A tribunal may be better if:
✔ You have a very strong claim
✔ The settlement offer is unfair
✔ You are prepared for risk and delay
Final Advice
Never choose settlement or tribunal without independent legal advice. A solicitor can:
Assess your claim strength
Estimate tribunal value
Negotiate a higher settlement
