A settlement agreement is a legally binding contract between an employer and an employee used to resolve workplace disputes or to end the employment relationship on mutually agreed terms. Typically, the employer offers a financial payment, often in exchange for the employee agreeing not to bring legal claims against the company, such as for unfair dismissal or discrimination. The agreement sets out the terms of separation, including any notice pay, termination payments, confidentiality obligations, and sometimes an agreed reference. For the agreement to be valid, the employee must receive independent legal advice, ensuring they fully understand their rights and the implications of signing.