NHS settlement agreements: what to check before signing

The law is the same

An NHS trust is an employer like any other for these purposes. A settlement agreement can only waive statutory employment claims if it meets the conditions in section 203 of the Employment Rights Act 1996: it must be in writing, relate to the particular complaint, and the employee must have received advice from a relevant independent adviser who is named in the agreement and covered by insurance.

The adviser signs a certificate confirming that advice was given. Only a solicitor, a certified trade union official or a certified advice centre worker can do it, which is why a trust will not accept an agreement signed without one.

What differs in the NHS is not the law but the context: a defined benefit pension, public money, and a statutory duty to speak up about patient safety. Each of those changes what the agreement should say.

The pension is usually the biggest number

For anybody with long service, the NHS Pension Scheme is worth more than the severance figure, and the two are often discussed as though only one of them exists.

Three questions decide the position. What happens to accrued benefits on leaving, which depends on the section of the scheme and the member's age. Whether early retirement is being offered and on what terms, because an unreduced early retirement is a very large benefit and a reduced one may not be. And whether the exit affects entitlement to any protection carried over from the 1995 or 2008 sections.

None of that is legal advice and a solicitor should not give it. It needs an estimate from NHS Pensions and, where the numbers are substantial, an independent financial adviser. The point is to get those figures before the compensation figure is agreed, because an employee who accepts a severance payment and then discovers the pension consequence has no route back.

Special severance and Treasury approval

Payments to NHS staff on exit that go beyond what is contractually or statutorily due are special severance payments, and public sector bodies need approval before making them. In practice that means an internal business case, then NHS England, then HM Treasury depending on the amount.

Two consequences follow for anybody negotiating. The process is slow, so an offer that would take a fortnight in the private sector can take months. And the trust has genuinely less discretion than a private employer, so a refusal to move on a figure is often a real constraint and not a negotiating position.

It also means the composition of the offer matters more than the total. Contractual notice, accrued holiday and outstanding pay are owed and do not need approval. Anything described as compensation for loss of employment may. Where the approval route is causing delay, restructuring the offer so that more of it is contractually due can clear it, and that is a conversation to have early.

What a confidentiality clause cannot do

Almost every settlement agreement contains a confidentiality clause. In the NHS there are hard limits on what it can achieve, and they exist for reasons that have been the subject of public inquiries.

Section 43J of the Employment Rights Act 1996 makes void any provision in an agreement that purports to preclude a worker from making a protected disclosure. That applies whatever the clause says, and a clause drafted to prohibit it does not become enforceable because somebody signed it.

Standard NHS settlement wording therefore carves out disclosures to regulators, to the police, to the Care Quality Commission, to NHS counter fraud, and under the trust's own speaking up policy. If the draft in front of you does not contain those carve-outs, ask for them. A trust that refuses is asking for something it cannot have.

The clause can still do useful work: keeping the terms of the agreement confidential, and preventing disparaging comment in both directions. Ask for the non-disparagement obligation to be mutual, since a one-way clause is common in first drafts and rarely survives being questioned.

References and the internal record

For clinical staff a reference works as a gate. NHS employment checks require a reference covering a defined period and in a set format, and a bare confirmation of dates can end an application.

So the reference belongs in the agreement, in agreed wording, attached as a schedule, with an obligation to respond to requests in those terms. Where the employer uses a standard template it should still be annexed, so there is no argument later about what will be said.

Ask separately about the internal record. What will appear on the personnel file, what an internal system will show about the reason for leaving, and whether any ongoing investigation is to be concluded, discontinued or left open. An agreement that is silent on that leaves the employee exposed on their next NHS application.

Professional regulators

A settlement agreement is between the employee and the trust. It does not bind the General Medical Council, the Nursing and Midwifery Council, the Health and Care Professions Council or any other regulator, and it cannot stop a referral.

Where a trust has an obligation to refer, it retains that obligation. Where a registrant has a duty to report a concern, signing an agreement does not discharge it. Any suggestion in negotiation that a payment will make a referral go away should be treated as a warning about the person making it.

What can properly be agreed is the factual account. Where an investigation is concluded without findings, the agreement can record that, and that record is useful if a regulator later asks.

Getting advice, and who pays

The trust contributes to the cost of independent advice, and the contribution is stated in the agreement. It covers advice on the terms and effect of the agreement, which is the statutory requirement, and it does not automatically cover negotiation or a view on whether the deal is good.

Where the position is more complicated than a straightforward exit, agree the scope and the fee at the outset. A clinician with an ongoing investigation, a pension decision and a regulatory question needs more than a certificate, and finding that out at the signing stage helps nobody.

If you are a union member, check what your union offers first. Many provide representation through their own legal scheme, which can be a better route than the employer's contribution.

If an investigation is still open

A large share of NHS settlements are offered while a disciplinary or capability process is running, and what happens to that process is often worth more than the money.

Three outcomes are possible and they are very different. The investigation can be concluded, with findings recorded. It can be discontinued, with the agreement recording that no findings were made. Or it can simply be left open, which is the default when nobody raises it, and it leaves a live matter on the file that a future employer or regulator may ask about.

Ask for the agreement to state which of the three applies. Where the process is being discontinued, ask for wording confirming that no findings adverse to you were made and that the matter is closed, and ask what the personnel file and any internal system will show.

Where an exclusion or restriction on practice is in place, deal with that expressly too. An exclusion that is lifted on the agreement being signed should say so, and a restriction that survives the employment has to be disclosed on future applications.

None of this changes a regulator's position, and it should not be presented as though it does. What it does is produce a written record of what the employer concluded, which is far more useful to you later than a recollection.

Timing and what happens if you refuse

The Acas Code of Practice suggests a minimum of ten calendar days to consider a written offer. Where the pension has to be modelled or an investigation is live, longer is reasonable and should be asked for.

Refusing an offer leaves the employment in place. The trust then has to follow its own process, which for clinical staff is usually the Maintaining High Professional Standards framework, and that process has procedural requirements of its own.

The decision is rarely only about money. Continuous NHS service, the pension, the reference and the regulatory position all carry forward, and they are worth more over a career than the difference between two severance figures.

Frequently asked questions

Is an NHS settlement agreement different from any other?

The law is identical: it has to meet the conditions in section 203 of the Employment Rights Act 1996, including independent advice from a named and insured adviser. Three things differ in practice. The NHS Pension Scheme is often worth more than the severance payment. Special severance payments need approval through NHS England and the Treasury, so the process is slower. And confidentiality clauses cannot restrict protected disclosures.

Can a settlement agreement stop me whistleblowing?

No. Section 43J of the Employment Rights Act 1996 makes void any provision purporting to preclude a worker from making a protected disclosure, whatever the clause says. Standard NHS wording carves out disclosures to regulators, the police, the Care Quality Commission, counter fraud and under the trust's own speaking up policy. If the draft you have been given lacks those carve-outs, ask for them before signing.

What happens to my NHS pension?

It depends on the scheme section, your age and your service, and whether early retirement is part of the offer. Accrued benefits are not lost, but the terms on which they can be taken vary a great deal and an unreduced early retirement is a very large benefit. Get an estimate from NHS Pensions and, where the figures are substantial, advice from an independent financial adviser before agreeing the compensation figure.

How much of a settlement payment is tax free?

Compensation for loss of employment is not taxable below £30,000, and anything above that is taxed as income. The exemption does not cover sums you were contractually entitled to: notice pay, accrued holiday, outstanding salary, commission and bonus are all earnings and are taxed in the normal way. Since April 2018 the post-employment notice pay rules tax the notice element whether or not your contract has a pay in lieu clause.

Will it stop a referral to the GMC or NMC?

No. A settlement agreement binds you and the trust; it has no effect on a regulator and cannot prevent a referral. Where the trust has an obligation to refer it keeps that obligation, and a registrant's own duty to report a concern survives the agreement. What can properly be recorded is the factual position, such as an investigation concluded without findings, which is useful if a regulator asks later.

How long should I be given to decide?

The Acas Code of Practice on settlement agreements suggests a minimum of ten calendar days to consider a written offer. In the NHS, longer is often reasonable: if the pension has to be modelled or an investigation is still live, ask for the time you need. Refusing an offer leaves your employment in place, and the trust then has to follow its own process, which for clinical staff carries procedural requirements of its own.

Sources & further reading

• Employment Rights Act 1996, section 203
• Employment Rights Act 1996, section 43J
• Acas: settlement agreements
• NHS Business Services Authority: NHS Pensions
• GOV.UK: redundancy, tax and National Insurance

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 21 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).