Settlement Agreements in Ireland: Employer Guide (2026)

Last updated October 2026. General information only, not legal advice.

A settlement agreement, also called a compromise or severance agreement, is a contract in which an employee accepts a payment or other benefits and, in return, agrees not to bring claims against the employer. Employers use them to end employment on agreed terms, to resolve a dispute, or to close off risk after a redundancy. There is no single Irish statute that governs them. The rules come from contract law and from decisions of the courts, the Labour Court and the Workplace Relations Commission (WRC), and they are strict about one thing: the employee’s consent must be informed.

Can an employee sign away statutory rights?

Irish employment legislation generally cannot be contracted out of. Section 13 of the Unfair Dismissals Act 1977, for example, makes void any provision in an agreement that purports to exclude or limit the Act. Other employment statutes contain similar provisions.

The courts have nonetheless accepted that an employee can validly settle an existing or potential claim, as distinct from agreeing in advance that the law will not apply to them. The difference is between a real bargain to dispose of a claim and an attempt to exclude the legislation. A valid settlement agreement means the WRC has no jurisdiction to hear the claims it covers.

What makes a settlement agreement valid

The leading cases are Hurley v Royal Yacht Club [1997] ELR 225 and the High Court decision in Sunday Newspapers Ltd v Kinsella and Bradley [2007] IEHC 324. WRC and Labour Court decisions applying them point to the following requirements:

• It is in writing.
• It lists the claims being waived. The agreement should name the specific Acts, or make clear that they were considered. A general waiver of “all claims” carries more risk.
• The employee gets something in return. The payment or benefit should go beyond what the employee is already entitled to.
• The employee is advised in writing to take appropriate advice, and is given enough time to do so. In Hurley, the court found the agreement void in the absence of such advice.
• Consent is free and informed. The Labour Court has said a waiver should normally follow meaningful negotiation and will be read strictly against the party who drafted it.

Appropriate advice is typically from a solicitor. Advice from a trade union official has been accepted in some decisions. Outcomes turn on the facts: waivers have been upheld where the employee was advised in writing to get advice, was given time and was offered a contribution towards the cost, and they have been set aside where the agreement merely recited that the employee had the opportunity to take advice. For that reason, employers commonly offer a contribution to the employee’s legal costs and allow a reasonable period before signing.

Typical terms

• the termination date and any notice arrangements;
• the payment, separating statutory entitlements from any ex gratia amount;
• full and final settlement wording with the list of Acts;
• confidentiality, subject to the legal limits described below;
• an agreed reference or statement of employment;
• mutual non-disparagement;
• return of company property;
• a contribution to the employee’s legal costs;
• a statement that there is no admission of liability.

Some rights cannot be waived at all. An agreement cannot stop an employee making a protected disclosure: section 23 of the Protected Disclosures Act 2014 makes any such provision void.

Limits on non-disclosure clauses since November 2024

The Maternity Protection, Employment Equality and Preservation of Certain Records Act 2024 inserted section 14B into the Employment Equality Act 1998, in operation since 20 November 2024. An employer may not enter into a non-disclosure agreement that stops an employee, including a former or prospective employee, from disclosing an allegation of discrimination, victimisation, harassment or sexual harassment. Any such clause is null and void.

There are two exceptions. The first is terms agreed through WRC mediation. The second is an “excepted” non-disclosure agreement, which must meet all of these conditions:

• the employee asks for it;
• the employee has received independent legal advice in writing from a legal practitioner before signing, at the employer’s expense;
• it is in writing, in clear language, and of unlimited duration unless the employee chooses otherwise;
• the employee can withdraw without penalty within 14 days of entering into it;
• it does not prevent disclosures to bodies and people such as the Garda, a legal or medical practitioner, Revenue or a trade union official.

If a settlement involves any allegation of this kind, a standard confidentiality clause will not be enough.

Tax on termination payments

Revenue’s rules allow part of an ex gratia termination payment to be paid tax-free:

• Statutory redundancy is exempt from tax.
• Basic exemption: 10,160 euro plus 765 euro for each complete year of service.
• Increased exemption: up to a further 10,000 euro where conditions are met, including no similar claim in the previous 10 years.
• Standard Capital Superannuation Benefit (SCSB): an alternative formula based on average pay and years of service, which can give a higher figure for long-serving employees.
• Lifetime cap: 200,000 euro across these exemptions.

Revenue’s guidance also says that an employer’s payment of the employee’s legal fees is not taxed where the fees relate only to the termination, are paid directly to the employee’s legal representative, and are paid under a specific term of the settlement agreement or a court order.

Time limits and WRC mediation

Most employment complaints must be made to the WRC within 6 months, which can be extended to 12 months where there was reasonable cause for the delay. This matters when negotiating, because an employee’s ability to claim is time-limited. Where a complaint has already been made, WRC mediation is available if neither side objects. Terms agreed in mediation are recorded in writing, signed and binding.

Using a template, and where a solicitor is needed

An employer can prepare the first draft of a straightforward exit agreement from a structured template. Our Compromise Agreement (Employment) is a self-complete document, with related letters in our disciplinary and dismissal letters category. For background, see our guide to unfair dismissal.

A template does not replace the advice step. The employee should be advised in writing to take independent advice, and an excepted non-disclosure agreement requires written advice from a legal practitioner. Employers facing a contested dismissal, a discrimination or harassment allegation, or a senior exit should also speak to a solicitor. You can search the Law Society’s Find a Solicitor directory.

Frequently asked questions

What is a settlement agreement in Irish employment law?

It is a written contract in which an employee accepts a payment or other benefits and agrees not to bring specified claims against the employer. It is also called a compromise agreement or severance agreement.

Does an employee need legal advice before signing a settlement agreement in Ireland?

The case law requires that the employee be advised in writing to take appropriate advice and be given time to do so. Advice is typically from a solicitor, and trade union advice has been accepted in some decisions. An agreement signed without that step is at real risk of being found void.

Is a settlement payment taxable in Ireland?

Statutory redundancy is exempt. For an ex gratia payment, Revenue allows a basic exemption of 10,160 euro plus 765 euro per complete year of service, with a possible increased exemption or the SCSB formula, subject to a lifetime cap of 200,000 euro. Amounts above the exemption are taxable.

Can a settlement agreement include a non-disclosure clause?

Yes, but with limits. Since 20 November 2024 a clause cannot stop an employee disclosing allegations of discrimination, victimisation, harassment or sexual harassment unless it is agreed in WRC mediation or meets the statutory conditions for an excepted agreement. No agreement can prevent a protected disclosure.

How long does an employee have to bring a claim to the WRC?

Generally 6 months from the date of the contravention or dismissal. An adjudication officer can extend this to 12 months where the employee shows reasonable cause for the delay.

Sources: Unfair Dismissals Act 1977, section 13 (revised); Employment Equality Act 1998, section 14B (revised); Revenue: lump sum payments, basic exemption; Labour Court decision EDA2626; WRC: mediation.

OnlineLegalServices.ie is not a solicitor’s practice and does not give legal advice. For advice on your own situation, speak to a solicitor.