Settlement and Severance Agreements

Written by Richard O'Shea, Solicitor TEP · Mary Molloy Solicitors, established 1981 · Last reviewed 21 August 2026

What a settlement agreement does

In exchange for a payment (and sometimes more — a reference, extended benefits), you waive claims against your employer: unfair dismissal, employment equality, payment of wages, notice entitlements, and usually "all claims of any nature". Irish law lets employees compromise statutory claims, but tribunals scrutinise waivers: an effective one generally requires that the agreement is clear, the claims waived are identified, and the employee gave informed consent — which is why the employer's own document so often recites that you were advised to take independent legal advice, and frequently offers a contribution toward it.

What to check before signing

• The maths — statutory redundancy (where applicable), notice or payment in lieu, accrued holidays, bonus and commission through the exit date: these are entitlements, not generosity. The negotiation is about what sits on top
• Tax treatment — statutory redundancy is tax-free; ex-gratia termination payments can attract significant reliefs subject to Revenue rules and lifetime limits, and the agreement should allocate and describe payments correctly — wrongly labelled, the same euro figure can net you thousands less
• The waiver's breadth — carve-outs you may need: accrued pension rights, personal injuries claims you don't know about yet, and claims that cannot lawfully be waived
• Restrictions that follow you — confidentiality both ways? Non-disparagement both ways? Any restraint reaffirmed or newly added — and if so, is it being paid for?
• The reference and the announcement — agree the wording as a schedule, not a promise
• The deadline — pressure is a tactic; a short extension for advice is almost always available for the asking, and refusing it says something worth hearing

For employers

A settlement that fails — waiver ineffective, tax treatment wrong, discrimination in the process — buys the dispute it was meant to end. We draft agreements that hold: clear identification of claims, informed-consent mechanics, correct payment characterisation, and terms proportionate enough that signing is the employee's rational choice.