Resolution
Settlement agreements and COT3
How settlements work, what terms matter, and how to negotiate safely.
Last updated 8 February 2026
Overview
There are two common ways to settle: a settlement agreement or a COT3 via ACAS.
Both can end a dispute and waive claims in exchange for compensation.
Key terms to review
- Compensation amount and payment date
- Notice pay, holiday pay, and bonuses
- Reference wording and announcements
- Confidentiality and non disparagement clauses
- Waiver of claims and legal fees contribution
Negotiation approach
- 01
Know your objectives
Decide what matters most: money, reference, or timing.
- 02
Check the numbers
Separate taxable pay from compensation.
- 03
Ask for a draft
Review the wording and mark changes in writing.
- 04
Get advice
Independent legal advice is required for settlement agreements.
Tax basics
- Notice pay and wages are taxable as normal income.
- Compensation may be tax free up to the statutory limit, depending on the payment type.
- Always confirm how the payment will be reported to HMRC.
Common questions
Do I have to accept a settlement?
No, it is voluntary. You can reject it or negotiate changes.
Is a COT3 different from a settlement agreement?
Yes. A COT3 is an ACAS brokered settlement and does not require a solicitor.
Can I still claim after signing?
Usually no. Settlement agreements and COT3 deals typically waive listed claims.
Next steps
Keep your facts organised and protect your time limits with the tools below.
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