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Settlement agreements in Ireland: what to check before you sign
Checked 13 Oct 2026the employment Acts as amended.
A settlement agreement in Ireland pays you a sum in return for waiving your claims. Check the figure, the tax treatment, the reference, confidentiality and the waiver, and take advice before signing.
Written for employees. This guide covers the Republic of Ireland.
A settlement agreement is a contract in which your employer pays you a sum and you agree not to bring the claims you might have. It is also called a compromise agreement, a termination agreement or, where the WRC has been involved, a mediated agreement. Settlements end a large share of dismissal disputes, and most of them are reasonable. This guide tells you what one is, what to check before you sign, how the tax works, when it should be paid, and why you never sign under pressure.
What a settlement agreement is
The structure is simple. The employer offers money, and usually some non-financial terms, in return for your agreement that your employment has ended (or will end on a date) and that you will not bring claims about it. Once signed, it is binding like any contract.
Settlements arise in three settings:
- Before any complaint. The employer wants to end the relationship and offers a package to avoid a claim. Often presented as a "without prejudice" conversation or an "enhanced exit".
- After a WRC complaint is lodged. The WRC offers free, confidential mediation, and a mediated agreement is binding and not published. Many unfair dismissal and constructive dismissal complaints end this way.
- At the door of the hearing. Negotiated between representatives on the day.
Nothing obliges you to accept one. Nothing obliges the employer to offer one. The agreement reflects what each side thinks the claim is worth and what it would cost to run.
What to check
The sum, and how it is broken down
Ask for the figure to be itemised. A single headline number can hide the fact that most of it is money you were owed anyway. The usual lines are:
| Line | What it is | Owed regardless? |
|---|---|---|
| Wages to the termination date | Pay for days worked | Yes |
| Notice pay or pay in lieu | One to eight weeks by service, or the contractual period | Yes, unless gross misconduct |
| Accrued annual leave | Leave earned and not taken | Yes |
| Statutory redundancy | Two weeks' pay per year plus one week, capped at €600 a week, where the exit is a redundancy with 104 weeks' service | Yes, if it is a redundancy |
| Bonus or commission | Any amount earned under the contract | Depends on the contract |
| Ex gratia payment | The payment for giving up your claims | No, this is the settlement |
Only the last line is the settlement. Check it against what the claim might be worth: the unfair dismissal tool gives a loss-based range and the register of reported awards shows what the WRC has done in similar cases. The notice tool and the redundancy tool confirm the lines that are owed anyway.
The tax treatment
The agreement should say how each line is treated. Wages, notice pay, holiday pay and bonus are taxed as pay through payroll. Statutory redundancy is free of income tax, USC and PRSI. An ex gratia payment for loss of office can be partly or wholly tax-free under Revenue's exemptions, set out below. An agreement that describes notice pay as "ex gratia" to make it tax-free is a problem for you, not the employer, if Revenue looks at it later.
The reference
A settlement is one of the few ways to obtain an agreed reference, because there is no general duty on an employer to give one. Ask for the wording to be attached to the agreement as a schedule, and for a term that any oral reference will be consistent with it. "Dates and job title only" is a common compromise.
Confidentiality and non-disparagement
Most agreements require you to keep the terms confidential and not to disparage the employer. Check that the obligation is mutual, that you can tell your family, your advisers and Revenue, and that it does not stop you reporting wrongdoing to a regulator or making a protected disclosure, which no agreement can lawfully prevent. Check what happens if you breach it: a clawback of the whole sum is heavy-handed and can be negotiated.
The waiver of claims
This is what the employer is paying for. A good agreement lists the Acts under which claims are waived: the Unfair Dismissals Acts, the Minimum Notice Acts, the Payment of Wages Act, the Organisation of Working Time Act, the Employment Equality Acts, the Redundancy Payments Acts and so on. Read the list. If it includes a claim you did not know you had, ask about it. If it tries to waive claims that have not yet arisen, or personal injury claims for an injury you do not yet know about, it may not be enforceable but it is better removed. A claim that is already lodged at the WRC will be withdrawn as part of the deal; make sure the agreement says who does that and when.
Independent advice
Many agreements require you to confirm that you have taken independent legal advice, and some employers contribute to its cost. The requirement protects the employer, because an agreement signed with advice is much harder to challenge. It also protects you. If the employer will not contribute, a union official can review the agreement for a member, and a short fixed-fee review by a solicitor is normal for a sum of any size.
The rest
Check the termination date and whether you are on garden leave until then; what happens to your pension, health insurance, share options and company property; whether any restrictive covenants in your contract survive; whether the agreement is "full and final"; and which law governs it, which should be Irish law.
The tax exemptions
An ex gratia payment on termination can be tax-free up to the highest of three figures, within a lifetime cap. The figures are Revenue's and the redundancy tool applies them.
- Basic Exemption: €10,160 plus €765 for each complete year of service.
- Increased Exemption: the Basic Exemption plus up to €10,000, where you have not received, and are not entitled to, a tax-free lump sum from a pension scheme, and have not claimed the increase in the previous ten years. Any tax-free pension lump sum reduces it.
- SCSB (Standard Capital Superannuation Benefit): your average annual pay over the last three years, multiplied by complete years of service, divided by 15, less any tax-free pension lump sum. Usually the highest for longer service and higher pay.
Since 2011 the total tax-free ex gratia amount over a lifetime is capped at €200,000. Anything above the exemption is taxed as income in the year of payment. The employer applies the exemption on payroll and reports the payment to Revenue; the redundancy chapter's tax guide has worked examples.
Compensation awarded by the WRC for unfair dismissal is treated in the same way as an ex gratia payment for tax. Payments for discrimination not linked to loss of earnings have a different treatment, and the agreement should say which is which.
When it should be paid
The agreement should name a payment date: within 14 or 28 days of signing, or of the termination date, is common. Wages, notice and holiday pay usually go through the final payroll. If no date is stated, do not sign until one is. If the sum is not paid on the date, the agreement is a contract you can enforce in the courts; a WRC mediated agreement is enforceable through the District Court like a decision. Do not withdraw a lodged complaint until the money has arrived, or make the withdrawal conditional on payment.
Never sign under pressure
The warning signs are familiar: an agreement handed over at a meeting you did not know was about your departure, a demand for a signature before you leave the room, a figure that will "go down tomorrow", or a suggestion that taking advice will make things worse. None of that is how a fair settlement is offered.
Say that you will consider it and take advice. Ask for a copy to take away. A reasonable employer expects a few days to a couple of weeks. An agreement signed under real pressure, without advice, for a sum that does not reflect the claim, has been looked at critically by the WRC when the employer later relied on it, but challenging a signed agreement is a poor position to be in. Not signing is the better protection.
If you have been dismissed and the agreement is offered afterwards, remember the six-month clock for a WRC complaint runs from the date of dismissal, and negotiation does not stop it. Lodging the complaint costs nothing, keeps your position, and can be withdrawn when the agreement is paid.
Where this leaves you
Put the agreement's lines through the tools: the redundancy tool for the statutory sum and the tax-free exemption on the ex gratia payment, the notice tool for the notice pay, and the unfair dismissal tool for what the waived claim might have been worth.
If you are in a union, ring them first: a union official reviews settlement agreements for members as a matter of course and will know what the employer has paid before. See union. Otherwise, a solicitor reviewing the agreement before you sign is the one piece of legal spend that almost everyone in this position should make, and the enquiry form on this page is for exactly that.
Frequently asked questions
Is a settlement agreement taxed in Ireland?
Partly. Notice pay, wages, holiday pay and bonus in the agreement are taxed as pay. An ex gratia sum for loss of office can be tax-free up to the Basic Exemption of €10,160 plus €765 per complete year of service, with an Increased Exemption of up to €10,000 more where you have no tax-free pension lump sum, or the SCSB where that is higher, within a €200,000 lifetime cap. Statutory redundancy is tax-free in full.
Is there a settlement agreement template I can use?
The employer's solicitor normally drafts the agreement, and this site does not supply a template. What matters is the checklist: the sum and how it is broken down, the tax treatment, the reference, confidentiality, the waiver of claims, the payment date and independent advice. Each is covered in this guide.
When should a settlement agreement be paid?
On the date the agreement states, usually within 14 to 28 days of signing or of your last day. If no date is stated, ask for one before you sign. An agreement that is not paid on time can be enforced as a contract, and a WRC mediated agreement can be enforced through the District Court.
Do I have to sign a settlement agreement?
No. It is a contract, and you can decline, negotiate or take time to consider it. An employer that insists you sign on the spot, or threatens a worse outcome if you take advice, is giving you a reason to slow down. A claim waived in an agreement signed under real pressure may be challenged, but it is far better not to sign.
Does a settlement agreement stop a WRC claim?
A properly drafted agreement, signed with independent advice and for a real sum, waives the claims it names and the WRC will generally not hear them. A general waiver that does not identify the claims, signed without advice, has been looked at more critically. Statutory rights that have not yet arisen cannot be waived.