Settlement agreement

This agreement includes the legal provisions to qualify a compromise agreement so as to prevent a later claim before the court. It is drawn primarily with a view to settling a claim by a more expensive employee. The agreement can however, be used with the same effect for a case involving a more junior staff member.
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About this document

Why use this document?

Avoid heated situations and disagreements - end your relationship wisely and with care using this document.

If an employee and employer agree to end the contact on terms other than those in the contract of employment it is crucial to ensure that the agreement is mutual in order to avoid claims later. This sort of agreement is subject to strict criteria. Unless you use the right document, your agreement will not qualify.

The compromise agreement has been drawn primarily with a view to settling a claim by a higher paid employee but of course the agreement can be used with any level of employee, from junior to a director.

If a senior employee has been employed under a service contract which does little to protect the company, this document will help to repair the damage by imposing “usual” provisions as a fair exchange for the money you will offer.

Note: many professional advisers overlook the necessity for the employee to have a prospective or actual claim. In most cases it will be necessary to have terminated the employment before this type of agreement can be used to any effect. However, that is not to say “without prejudice” negotiations cannot take place in the knowledge that a termination is proposed.

Who will use this document?

  • An employer in any organisation wishing to agree terms for termination of employment
  • An employee whose employment has been terminated, who wishes to negotiate terms for settlement of claims
  • Suitable for any employee: drawn to settle very large claims with senior staff, but suitable also for junior staff


  • Continuation of employment for fixed period until the “termination date” - as short or long a period as you wish
  • Extent of continuing entitlement to pay and benefits
  • Return of organisation's property
  • Return of car
  • Guarding secrets and information
  • The compensation package
  • Restrictions on future competition by the ex-employee
  • Press release and publicity
  • Information to qualify the agreement under relevant employment legislation

This document was written by a solicitor for Net Lawman. It complies with current New Zealand law.

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