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Without Prejudice Settlement Offer Letter Template

Draft a professional UK Without Prejudice settlement offer letter that an employer can send to an employee proposing exit terms. Covers Section 111A protected conversations under the Employment Rights Act 1996, the ACAS Code 10-day consideration window, ITEPA 2003 tax treatment and the Vento bands. Fill in, preview, and download as a PDF in minutes.

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Marlborough Industries Ltd (Company No. 07382914)
120 Cheapside, London EC2V 6DR | Helen Patricia Carter, Director of Human Resources
020 7946 0521
h.carter@marlborough.co.uk
2026-05-22
James Andrew Foster
17 Aldwych Road, Ealing, London W5 3DT
RE: WITHOUT PREJUDICE AND SUBJECT TO CONTRACT (SECTION 111A ERA 1996)
Proposed settlement — Senior Project Manager
Dear James Andrew Foster,

I am writing to you in your capacity as Senior Project Manager in the Infrastructure and Delivery department (continuous service from 2018-09-03) to propose a confidential settlement. This letter, and any discussions following from it, are made on a strictly WITHOUT PREJUDICE AND SUBJECT TO CONTRACT (SECTION 111A ERA 1996) basis. Please read the rest of this letter carefully and take independent legal advice before responding.
1.
STATUS OF THIS COMMUNICATION
1.1 This letter is written on a Without Prejudice basis and (where applicable) as a protected conversation within section 111A of the Employment Rights Act 1996. It is intended as a genuine attempt to settle (or, in the alternative, as confidential pre-termination negotiations) and accordingly cannot be referred to in subsequent Employment Tribunal or court proceedings save as to costs and within the "improper behaviour" carve-out (ACAS Code paragraphs 17-18). 1.2 The s.111A protection is confined to ordinary unfair dismissal claims under s.111 ERA 1996; the Without Prejudice doctrine is relied upon for any other claim category. 1.3 This letter is Subject to Contract: no agreement is binding until a formal Settlement Agreement is signed by both parties.
2.
BACKGROUND AND PROPOSED EXIT
2.1 We are writing to you in the context of a redundancy / role-elimination situation (within the meaning of section 139 of the Employment Rights Act 1996). 2.2 We propose that your employment with Marlborough Industries Ltd would terminate on 2026-07-31 by mutual agreement on the financial and non-financial terms set out below.

2.3 Background:
Following a strategic review completed in April 2026, the Infrastructure and Delivery team is reducing from 18 to 12 roles. Your role has been provisionally identified as at risk following a fair selection process under our Redundancy Policy (version 3, dated November 2024). This letter offers an alternative to continuing the formal redundancy procedure.
3.
PROPOSED FINANCIAL TERMS
3.1 Subject to a formal Settlement Agreement being signed, we propose the following payments. All sums are gross and will be paid subject to the deductions referred to in clause 4. The sums would be paid to your nominated bank account on or before 2026-08-14.
PROPOSED SETTLEMENT SCHEDULE
DescriptionAmount (GBP)Tax treatment
Ex-gratia compensation for loss of office (inclusive of statutory redundancy pay of £5,200; first £30,000 tax-free under ITEPA 2003 ss.401-403)£32,000.00First £30k tax-free (ITEPA 2003 s.403)
Payment in lieu of notice (PILON)£8,500.00PENP taxable in full (ITEPA 2003 ss.402A-E)
Accrued but untaken holiday pay£2,150.00Taxable as earnings under PAYE
Outstanding bonus / commission£3,000.00Taxable as earnings under PAYE
Employer contribution to Employee's reasonable legal fees£750.00Paid direct to adviser + VAT; ITEPA 2003 s.413 exempt
Total payable (gross)£46,400.00
4.
TAX TREATMENT
4.1 The ex-gratia compensation element of any settlement (less any element treated as Post-Employment Notice Pay) is intended to fall within the £30,000 tax-free threshold in sections 401-403 of the Income Tax (Earnings and Pensions) Act 2003. 4.2 Any Payment in Lieu of Notice (PILON) is treated as Post-Employment Notice Pay (PENP) under ITEPA 2003 ss.402A-402E, taxable in full as earnings and subject to PAYE/NIC. The PENP formula is ((BP × D) / P) − T and has been applied to the figures above. 4.3 Class 1A NIC on any excess over £30,000 is for the Employer's account. The Employer makes no representation as to the Employee's ultimate tax position; you should rely on your own adviser's analysis.
5.
NO ADMISSION OF LIABILITY
For the avoidance of doubt, this letter and the proposed terms are made without admission of any unlawful act, breach of contract, breach of statutory duty or other liability on the part of the Employer, any Group Company or any of their respective officers, employees or agents. The proposed payment is made solely with a view to bringing about an amicable end to the employment relationship and avoiding the time, cost and disruption of any potential proceedings.
6.
CONTRIBUTION TO YOUR LEGAL FEES
We will contribute up to £750.00 (plus VAT where applicable) towards your reasonable legal fees in obtaining independent legal advice on the terms and effect of the proposed Settlement Agreement, paid directly to your adviser's firm against an appropriate invoice addressed to the Employer. This contribution is intended to be treated as being for the sole purpose of advice on the Agreement within HMRC ITEPA 2003 s.413 and the related EIM13750.
7.
SUGGESTED INDEPENDENT ADVISERS
You are entirely free to choose your own legal adviser. Without prejudice to that, the following adviser(s) have indicated availability and are familiar with this type of matter:

Stevens and Partners Employment Solicitors, 14 Holborn Viaduct, London EC1A 2BN — 020 7404 7250
Thompson Bryant LLP (Employment team), Bishopsgate Tower, London EC2N 4AY — 020 7588 4400

For your eventual Agreement to be a qualifying settlement agreement under section 203(3)-(4) of the Employment Rights Act 1996, your adviser must be a solicitor with a practising certificate, a barrister in independent practice, a CILEx fellow in a solicitors' firm, a certified trade-union officer/employee or a qualifying advice-centre worker, with PI insurance in force at the time of the advice.
8.
REFERENCE
We are willing to provide an agreed reference on receipt of a written request from a bona-fide prospective employer, in the following terms:

We confirm that James Foster was employed by Marlborough Industries Ltd as Senior Project Manager in the Infrastructure and Delivery team from 3 September 2018 to 31 July 2026. He left on good terms by reason of redundancy. Further information is available on written request from a bona-fide prospective employer.

The agreed reference will not be departed from save as required by law or where doing so would otherwise give a materially misleading impression.
9.
INTERNAL / EXTERNAL ANNOUNCEMENT
We propose that the announcement of your departure (to colleagues and where appropriate to external contacts) will be in the following terms:

James Foster is leaving Marlborough Industries to pursue new opportunities. We thank him for his eight years of contribution to the Infrastructure and Delivery team and wish him every success.
10.
CONFIDENTIALITY
The Settlement Agreement is to contain mutual confidentiality obligations covering its existence, terms and the circumstances of your departure. Permitted disclosures will include disclosures: (a) to immediate family under a duty of confidence; (b) to legal, tax or financial advisers; (c) as required by law, court, regulator or HMRC; (d) to comply with insurance, mortgage or pension application disclosures; (e) for the purposes of any protected disclosure under Part IVA of the Employment Rights Act 1996; and (f) with the other party's prior written consent. Nothing in the Settlement Agreement will prevent you from making allegations or disclosures of information relating to workplace harassment, discrimination or failure to make reasonable adjustments; any provision purporting to do so would be void in accordance with the NDA restrictions in the Employment Rights Act 2024 (expected commencement 2027) and existing public-policy principles.
11.
NON-DEROGATION / NON-DISPARAGEMENT
Each party will undertake not to make (and the Employer will procure that its directors and senior managers do not make) any statement about the other which is derogatory, disparaging or inconsistent with the agreed reference or announcement, save as required by law, court, regulator or HMRC, or in the course of a protected disclosure under ERA 1996 Part IVA.
12.
POST-TERMINATION RESTRICTIVE COVENANTS
The post-termination restrictive covenants in your contract of employment (including confidentiality, non-compete, non-solicitation and non-dealing obligations) would continue to apply in full following the Termination Date. The consideration under the proposed Settlement Agreement would also support those covenants for the purposes of Tillman v Egon Zehnder [2019] UKSC 32.
13.
RETURN OF EMPLOYER PROPERTY AND INFORMATION
By the Termination Date you will be expected to return to the Employer all Company property and any confidential information in your possession or control (including hard-copy and electronic records, and information on personal devices which will be deleted under supervision). The specific items to be returned are:

MacBook Pro 16 (asset tag MRL-LAP-0421), iPhone 14 (IMEI 359714238561073), access card (#0421), American Express corporate card (-3829), and any project documentation stored on personal devices — to be returned by 18 July 2026.
14.
EMPLOYMENT RIGHTS ACT 2024 — EXTENDED TRIBUNAL TIME LIMIT
We acknowledge that the Employment Rights Act 2024 (Royal Assent 2025, staggered commencement) extends the Employment Tribunal time limit for most claims from three to six months with effect from 1 October 2026. Where the act or omission complained of in any preserved or future claim occurred on or after that date, the time limit applicable to any subsequent Tribunal claim would be six months (extended further by ACAS Early Conciliation in the usual way). This acknowledgement does not affect either party's rights or obligations under this proposed settlement.
15.
AI / AUTOMATED DECISION-MAKING SAFEGUARD
We confirm that, in respect of any decision affecting your employment that has led to this proposed settlement (including any redundancy selection, performance review or disciplinary determination), no decision producing legal or similarly significant effects has been taken solely by automated processing, save where Article 22(2) UK GDPR permits and appropriate safeguards have been applied (Article 22 UK GDPR). Where AI or automated tools have been used to inform any such decision, human review and oversight have been applied. You may request meaningful information about the logic involved and the significance and envisaged consequences of any such processing under Articles 13(2)(f), 14(2)(g) and 15(1)(h) UK GDPR, and may seek human review under Article 22(3) UK GDPR, with regard to the ICO's 2024 guidance on AI and data protection.
16.
NEXT STEPS — INDEPENDENT LEGAL ADVICE AND TIMING
You should take independent legal advice on the terms and effect of any settlement before signing. For the eventual Settlement Agreement to be a qualifying settlement agreement that waives statutory claims, your adviser must fall within one of the categories in ERA 1996 s.203(4) (solicitor; barrister; CILEx fellow in a solicitors' firm; certified trade-union officer/employee; or qualifying advice-centre worker) and there must be a contract of insurance covering the advice (s.203(3)(d)-(e)). You are entitled to a reasonable opportunity to obtain and consider that advice. In accordance with paragraph 12 of the ACAS Code of Practice on Settlement Agreements, we propose a minimum of 14 calendar days from the date of this letter for you to consider and respond, with a final indicative response date of 2026-06-05. If we have not heard from you by then we may, depending on the circumstances, withdraw this proposal or revert to the relevant internal process.

How to respond: Please ask your adviser to confirm acceptance in principle by email to h.carter@marlborough.co.uk by the deadline at clause 5. We will then send a formal Settlement Agreement and Adviser's Certificate for signature.
17.
NOT A DISMISSAL — STATUS OF EMPLOYMENT PENDING DISCUSSION
For the avoidance of any doubt, this letter is not a notice of dismissal and does not terminate your employment. Your employment continues on its existing terms until any agreed Termination Date and is unaffected by these settlement discussions. Any failure to reach agreement will leave the parties in their existing positions and any relevant internal process will resume as appropriate.
18.
GOVERNING LAW
Any eventual Settlement Agreement is intended to be governed by and construed in accordance with the law of England and Wales. From 1 October 2026 the time limit for bringing most Employment Tribunal claims is extended from three to six months by the Employment Rights Act 2024.
YOURS SINCERELY,
Helen Patricia Carter
Director of Human Resources, Marlborough Industries Ltd
Date: ____________________
FOR AND ON BEHALF OF THE EMPLOYER
Helen Patricia Carter
Director of Human Resources
Date: ____________________
EMPLOYEE — ACKNOWLEDGEMENT OF RECEIPT
James Andrew Foster
Receipt only — not acceptance of the proposed terms
Date: ____________________

What Is a Without Prejudice Settlement Offer Letter?

A Without Prejudice settlement offer letter is the opening communication an employer sends to an employee proposing a financial settlement and exit terms — typically as an alternative to continuing a redundancy, performance or disciplinary process. It precedes the formal Settlement Agreement that, if accepted, will validly waive statutory employment claims under section 203 of the Employment Rights Act 1996.

The letter is protected from being used as evidence in tribunal proceedings on two bases. First, the common-law Without Prejudice rule shields genuine attempts to settle a pre-existing dispute. Second, section 111A of the Employment Rights Act 1996 provides a statutory "protected conversation" framework even where no dispute yet exists — but only for ordinary unfair dismissal claims under s.111.

Across the United Kingdom, this letter is the standard first step in employer-led settlement discussions. It is used in every sector — from London financial services to manufacturing in the North of England — wherever a structured separation makes more sense than continuing an internal process. The letter is "Subject to Contract" so neither party is bound until a formal Settlement Agreement is signed.

What's Covered in This Template

Our template generates a complete UK settlement offer letter with the prescribed protection wording, financial schedule, tax treatment notes and statutory framework.

Dual Protection Header

Three-way switch between Without Prejudice only, Section 111A only, or Both — the recommended default for most British employers.

Subject to Contract Framing

Explicit "Subject to Contract" preserves both sides' right to walk away until a formal Settlement Agreement is signed.

Background Context

Customisable reason (redundancy, mutual exit, performance, ill-health, restructure or existing dispute) with optional narrative background.

Financial Schedule Table

Itemised settlement schedule: ex-gratia compensation, PILON, accrued holiday pay, outstanding bonus — each with tax treatment notes.

ITEPA 2003 Tax Treatment

Explains the £30,000 tax-free threshold under sections 401-403, PENP formula under ss.402A-E, and Class 1A NIC on the excess.

Vento Injury-to-Feelings

Optional Vento band allocation (Ninth Addendum 2026 — lower / middle / upper / exceptional), apportioned non-taxable under ITEPA s.406.

No Admission of Liability

Express clause preserving the employer's position if the matter does not settle — critical for protecting future arguments.

Legal Fees Contribution

HMRC-compliant employer contribution to the employee's legal fees, exempt under ITEPA 2003 s.413.

Suggested Independent Advisers

Optional list of suggested solicitors meeting the s.203(4) qualifying-adviser criteria, while preserving the employee's choice.

Reference & Announcement

Agreed reference wording (with Spring v Guardian Assurance backstop) and internal/external announcement text.

Confidentiality + NDA Reform Carve-Out

Mutual or one-way confidentiality with the 2027 NDA-reform carve-out for harassment, discrimination and reasonable-adjustment disclosures.

Non-Dismissal Confirmation

Express statement that the letter is not a notice of dismissal — addresses the Wrigleys 2024 case-law caution.

How to Create a Settlement Offer Letter

Follow these steps to produce a UK-compliant Without Prejudice settlement offer letter.

  1. 1

    Identify the Parties and Context

    Enter the employer details, the HR signatory who will send the letter, and the employee. Specify whether the offer arises from redundancy, performance, an existing grievance, or a mutual decision. The protection basis (WP, s.111A or both) is critical — "both" is safest where there is any prospect of a discrimination, whistleblowing or wrongful dismissal claim.

  2. 2

    Set the Financial Offer

    Enter the ex-gratia settlement sum, any PILON with PENP treatment, accrued holiday pay and outstanding bonus. The template generates a settlement schedule with the tax treatment of each line clearly stated. For discrimination cases, allocate an injury-to-feelings element from the current Vento bands.

  3. 3

    Add Expert Process Terms

    In the Expert mode, include a "no admission of liability" clause, the employer's contribution to legal fees, a list of suggested independent advisers, and an extended consideration period (10/14/21 days). The ACAS Code requires a minimum of 10 calendar days for the employee to consider the proposal.

  4. 4

    Tailor the Non-Financial Terms

    Choose reference policy (agreed or basic factual), the announcement text, confidentiality (mutual or one-way), non-derogation, restrictive covenants (apply / vary / waive) and return of property with asset-tag detail. These are the terms that decide the post-exit relationship.

  5. 5

    Add the 2025-2026 Statutory Overlay (Expert)

    Toggle on the Worker Protection Act 2023 preventative-duty acknowledgement, the Employment Rights Act 2024 6-month tribunal time-limit acknowledgement, the NDA reform 2027 carve-out, and the Article 22 UK GDPR AI safeguard. Download as a PDF and serve on the employee with sufficient time to take independent legal advice.

Legal Considerations

Settlement offer letters in the United Kingdom sit at the intersection of common-law privilege, the statutory protected-conversation regime and current ACAS guidance. Drafting precision matters.

This template is for informational purposes only and does not constitute legal advice. Consult a qualified UK solicitor for advice specific to your situation.

Reviewed for England & Wales law

Without Prejudice vs Section 111A

The common-law Without Prejudice rule (Cutts v Head [1984] Ch 290; Unilever plc v Procter & Gamble [2000] 1 WLR 2436) protects genuine attempts to settle an existing dispute. Section 111A ERA 1996 provides a separate, narrower statutory protection even without a pre-existing dispute — but only for ordinary unfair dismissal claims under s.111. It does not extend to discrimination under the Equality Act 2010, automatic unfair dismissal, whistleblowing detriment, breach of contract or wrongful dismissal. UK employers should use both frameworks together where possible.

ACAS Code Compliance

The ACAS Code of Practice on Settlement Agreements (2015) sets out the procedural framework for British employers. Paragraph 12 requires a minimum of 10 calendar days for the employee to consider written terms. Paragraph 13 confirms the employee's right to be accompanied at any meeting. Paragraphs 17-18 define "improper behaviour" — harassment, discrimination, physical assault, victimisation or undue pressure — which lifts the s.111A protection. The 2024 EAT case of Gallagher v McKinnon's Auto and Tyres Ltd confirmed that "improper" requires more than mere "unfair".

Tax Treatment Under ITEPA 2003

In the UK, the ex-gratia compensation element of any settlement is intended to fall within the £30,000 tax-free threshold in sections 401-403 of the Income Tax (Earnings and Pensions) Act 2003. Any Payment in Lieu of Notice (PILON) is treated as Post-Employment Notice Pay under ss.402A-402E and is taxable in full. The PENP formula ((BP × D) / P) − T has applied since 6 April 2018. Class 1A National Insurance is payable by the employer on the excess over £30,000. Legal-fees contributions are exempt under s.413 where paid for the sole purpose of advice on the Agreement.

Not a Dismissal Letter — Wrigleys 2024

A 2024 case note by Wrigleys Solicitors warned that a letter marked "Without Prejudice" that proposed settlement could itself be construed as a dismissal letter where the language pre-judged the termination. Our template includes an express clause confirming the letter is not a notice of dismissal and that the employee's employment continues unaffected during discussions. This drafting precaution is now standard British practice.

Frequently Asked Questions

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