Constructive dismissal settlement advice: how recent HM Courts & Tribunals Service delays affect timing and compensation expectations

Key Takeaways

• Constructive dismissal settlement advice is essential in 2024 as HM Courts & Tribunals Service delays mean tribunal claims often face backlogs of a year or more.
• Recent HMCTS delays may increase the value of settlement agreement offers because employers want to avoid long, costly tribunal claims and reputational risk.
• You usually have only three months minus one day from your resignation date to start Acas early conciliation, regardless of tribunal hearing delays.
• A properly negotiated settlement agreement can secure higher compensation, an ex gratia payment and agreed reference without waiting years for a tribunal.
• Only a qualified SRA regulated solicitor can give the mandatory independent legal advice needed to finalise your settlement agreement under s.203 Employment Rights Act 1996.
• Settlement agreement compensation can include a tax-free element up to £30,000, but expert advice is crucial to avoid tax or National Insurance traps.
• Our solicitors provide free, same-day remote legal advice to employees, as the employer typically pays all fees for constructive dismissal settlement advice.
• Settlement Agreement Lawyers is rated Excellent with over 1,400 five-star reviews of our lawyers on Trustpilot, Google and other review platforms across the UK.

Constructive dismissal settlement advice: how recent HM Courts & Tribunals Service delays affect timing and compensation

If you have resigned because of your employer’s serious breach of contract and have been offered a settlement agreement, it’s crucial to get specialist constructive dismissal settlement advice—especially now, as HM Courts & Tribunals Service delays mean tribunal hearings might be years away. Independent legal advice is legally required for your settlement agreement to be valid, and your employer will almost always cover our fees, making our advice free for you.

Signing a settlement agreement means giving up your right to bring future employment tribunal claims, so it’s essential to understand whether your compensation offer is fair, what tax applies, and how current tribunal backlogs could increase your negotiating power. Our solicitors will ensure you meet all tight deadlines, explain how HMCTS delays affect the value and timing of settlements, and help you secure the best possible outcome.

In this article, you’ll find practical steps for negotiating your settlement, what clauses to ask for, key timing tips, and how to make the delays work to your advantage. For fast, expert help, call our solicitors on 0800 054 1144 or book your settlement agreement advice online.

How do HM Courts & Tribunals Service delays impact constructive dismissal settlement advice in 2024?

HM Courts & Tribunals Service (HMCTS) delays in 2024 have significantly shifted the landscape for employees pursuing constructive dismissal claims. A backlog in the employment tribunal system—due to increased claims, limited judicial resources, and the aftereffects of the pandemic—means it can now take 18 months or more for some claims to reach a final hearing. This directly affects both the timing and strategy of settling claims, putting employees in a stronger bargaining position than before.

These delays make the prospect of waiting for tribunal justice far less attractive for employers, who face unpredictable legal costs and a potential order for compensation or re-employment if they lose. As a result, employers are more motivated to resolve disputes through settlement agreements. For employees, this delay can increase settlement values, as employers may be willing to pay more for the certainty of closing the matter promptly.

Strategically, settlements negotiated in this environment not only bring earlier financial security but also spare employees the uncertainty and stress of prolonged litigation. However, these delays can also impact the negotiation process, as both sides assess the risks: for example, the risk that key witnesses may leave, memories may fade, or documents may become harder to obtain as time passes.

If you are considering a constructive dismissal claim, do not let employer-side delays pressure you into a hasty decision. The current HMCTS backlog gives you additional leverage to negotiate a better settlement. Keep all relevant documents and correspondence organised, as timeframes are longer and essential evidence must be preserved for negotiations or potential hearings.

For expert guidance secured by decades of experience, read more about your claim options on our Unfair Dismissal page or contact our solicitors for tailored advice.

What is constructive dismissal and when are you eligible to claim?

Constructive dismissal occurs when you resign in response to your employer’s serious breach of contract—a breach so fundamental that it destroys the employment relationship’s trust and confidence. Typical grounds include non-payment of wages, unilateral demotion, unsafe working conditions, unlawful discrimination (Equality Act 2010), bullying or harassment, or a significant reduction in your duties or status.

To qualify to claim constructive dismissal in England and Wales, you usually need at least two years’ continuous service (unless the breach involves unlawful discrimination or whistleblowing). You must resign promptly in response to the breach and state clearly that you are resigning as a result. Importantly, you must not “affirm” the contract by staying too long after the breach or acting as though you accept it, otherwise you may lose the right to claim.

Timing is crucial: you only have “three months less one day” from your effective resignation date to begin Acas Early Conciliation, a compulsory step before a tribunal claim. This strict deadline remains in place despite tribunal backlogs, as explained on the Acas website.

An employee subjected to repeated management bullying resigns, stating in writing that the breach of the implied term of trust and confidence has forced their resignation. They register early with Acas for conciliation and keep detailed records, ensuring their claim is not lost despite court delays.

For further details about eligibility and typical breach scenarios, visit our Constructive Dismissal page.

Why do you need independent legal advice for settlement agreements? (s.203 Employment Rights Act 1996 explained)

A legally binding constructive dismissal settlement agreement is only valid if you receive independent legal advice (ILA) on its terms and effect. Section 203 of the Employment Rights Act 1996 (ERA) prohibits any settlement from waiving statutory employment rights unless certain conditions are met—including that you have received advice from a relevant independent legal adviser, who must also be covered by appropriate professional indemnity insurance.

The solicitor’s role is to ensure you fully understand the rights you are giving up—such as unfair dismissal, redundancy, discrimination or whistleblowing claims—as well as the specific settlement terms. The adviser must be independent from your employer. Our solicitors provide you with a written certificate to evidence that valid ILA has been given for the purposes of s.203 ERA 1996.

The SRA also requires settlement agreement advisers like our solicitors to ensure that you are not pressured into signing and that the agreement genuinely reflects your wishes and interests.

Never sign a settlement agreement without legal advice. The law requires our solicitor to explain not just what you are waiving, but also any negotiating points, so your agreement does not leave you materially worse off than your legal entitlements.

Learn more about the ILA process and what to expect on our Settlement Agreement Advice page.

How do tribunal delays influence settlement agreement negotiation and compensation amounts?

The backlog in employment tribunals has shifted power in favour of employees during settlement negotiations. Employers whose policies once relied on the deterrent effect of prolonged legal battles now face the real prospect of waiting years for resolution, risking increased legal costs, higher tribunal awards, and deteriorating evidence quality over time. This makes employers more receptive to reasonable (even improved) settlement offers, particularly in high-risk claims like constructive dismissal.

In practice, this means the “risk premium” that employers are willing to pay to settle—and avoid the uncertainty and cost of litigation—has increased. For example, where an employer might previously have offered three months’ pay to settle swiftly, they might now concede six or even nine months’ gross salary to compensate for the heightened inconvenience and legal exposure of a delayed tribunal.

Settlement negotiations are also influenced by factors such as: the strength of evidence, likelihood of witness availability over time, deteriorating employee wellbeing, and reputational risk for both parties. For employees, these factors can justify a firm but reasonable negotiation stance.

Our solicitors recently advised an employee offered three months’ salary in a constructive dismissal scenario. When we highlighted tribunal delays, the employer increased the offer to eight months—keen to avoid prolonged uncertainty and further legal fees.

For employees in redundancy situations, see our Redundancy guidance or use the Redundancy Calculator to estimate your statutory minimum.

Is the financial offer in your constructive dismissal settlement agreement fair?

Assessing whether the offer is fair starts with a detailed comparison of what you might recover at tribunal (if you succeed) against what’s proposed in your settlement agreement. For constructive dismissal, compensation typically includes: (1) a basic award (calculated similarly to redundancy), (2) a compensatory award for lost earnings and benefits, and (3) additional sums for injury to feelings if discrimination or whistleblowing is involved.

You must factor in the financial and practical costs of waiting months or years for a tribunal judgment, the risks of losing, the legal fee exposure (with rare exceptions, both sides pay their own costs), and possible tax implications. In 2024, many employers are offering larger up-front payments to offset the inconvenience of delays. Use our Settlement Agreement Calculator or Employment Tribunal Compensation Estimator to sense-check any offer.

Below is a comparison of key factors:

Always compare the “net” you receive after tax and deductions, and remember to include loss of bonus, holiday, pension, and potential negotiating sweeteners (e.g., outplacement support). Our solicitors can help you analyse the real-world value of the offer compared to your strongest likely tribunal outcome.

Are constructive dismissal settlement agreement payments tax free? Understanding tax, notice pay, and PENP

One of the most common questions in constructive dismissal settlements is how tax applies to your payment. HMRC rules generally allow compensation for loss of employment to be paid tax free up to £30,000 (ITEPA 2003, s.403), provided it is not contractual earnings, holiday pay, or payment in lieu of notice.

You must distinguish between:

• Contractual payments: such as salary, accrued holiday pay, and any “payment in lieu of notice” (PILON)—all are taxable.
• Compensation/ex gratia: the first £30,000 is tax free (unless relating to specific post-employment service or restrictive covenants).
• Post-Employment Notice Pay (PENP): Since 2018, pay that replaces part or all of your notice period is fully taxable and subject to NICs, even if called an “ex gratia” payment in the agreement.

Here’s a simple reference:

When reviewing your settlement agreement, look for any hidden “PENP” clause. Our solicitors ensure tax is calculated clearly—incorrect handling can leave you with unexpected tax bills or double deductions.

Our client was set to receive a £35,000 settlement. The agreement correctly applied £30,000 tax free, with the remainder subject to PAYE—but also included £5,000 as notice pay, which should be taxed separately. We clarified the breakdown and avoided costly mistakes.

More detail is available in HMRC’s tax treatment of termination payments guidance. For a free, expert review of your tax treatment, contact us for advice.

Which clauses and risks should you check in your constructive dismissal settlement? (Confidentiality, references, restrictive covenants, indemnities)

A comprehensive constructive dismissal settlement agreement goes well beyond the headline payment. It will commonly include strict confidentiality clauses, reference wording, restrictive covenants, warranties, and complex tax indemnities. Each of these can affect your future career and financial wellbeing.

• Confidentiality: Typically prohibits discussing the facts or terms of the settlement. Check for exceptions for family, professional advisers, or new employers verifying your work history.
• Agreed Reference: Insist on specific wording, attached as a schedule so your employer is contractually bound.
• Restrictive Covenants: These limit your ability to work in competing businesses or solicit clients. Ensure they reflect only what was in your original contract—new or extended restrictions can seriously hinder your career.
• Tax Indemnities: Most agreements make the employee responsible if the tax treatment is later challenged. This risk must be understood and, where possible, limited in scope or amount.
• Non-derogatory Statements: Mutuality is key—ensure both parties agree not to make negative statements about each other.

Our solicitors advise in detail on how each clause affects your rights in practice, and negotiate revisions if terms are unfair or need clarification.

Never overlook the impact of restrictive covenants in a settlement—if a new or tighter restriction is proposed, clarify if it’s necessary and for how long. Our solicitors can negotiate out-of-scope or punitive restrictions so you are not unduly restrained post-departure.

For further details on negotiating robust terms, visit our Performance, Capability & Disciplinary Exits and Discrimination resources.

What is the step-by-step process for signing a remote settlement agreement with quick turnaround?

Our remote settlement agreement process is streamlined for speed and convenience, particularly important when negotiations move quickly or you need funds released promptly. Here is the step-by-step process:

1. Send us your draft agreement: Email a copy in Word or PDF, along with your contact details and any related correspondence.
2. Book your remote advice appointment: Use our online booking link or call us to schedule a same-day or next-day slot.
3. Pre-appointment preparation: We review the documentation, request clarification if needed, and flag initial concerns—often on the same day.
4. Advice consultation (video or phone): Our solicitor explains every term, answers your questions, highlights negotiating points, and ensures you understand rights being waived.
5. Revisions/negotiations (if required): We can draft amends or negotiate directly with your employer’s HR/lawyers if you want changes to the agreement.
6. Signing: Once you’re satisfied, you sign the agreement electronically. We issue our s.203 ERA ILA certificate and send it back to your employer (usually immediately).
7. Payment: Your employer releases the funds, often within 3–5 working days of receipt of our certificate.

A client contacted us at 9am with their draft agreement. We reviewed and advised by video appointment within 2 hours, negotiated a revision, and their funds were released by the employer the same week.

If you need a settlement agreement urgently or have a tight deadline, our solicitors can deliver ILA on the same day. For fast, fully remote advice (free to employees), call our settlement agreement solicitors on 0800 054 1144, or book your settlement agreement advice online for a no-cost appointment today.

Why Choose Settlement Agreement Lawyers?

Our solicitors are specialists in employment law settlements, SRA-regulated, and focused on delivering rapid, practical solutions for employees facing constructive dismissal. Whether your priority is maximising compensation, resolving complex contractual matters, or simply moving on with minimal stress, our solicitors provide clear, independent advice. Our ILA process meets all statutory and SRA standards, ensuring your agreement is legally binding and your rights are fully protected.

We work exclusively for employees, never for employers, so your interests are our only priority. We handle hundreds of settlement agreements each year—including those complicated by redundancy, discrimination, whistleblowing, and hardship circumstances. Our fully remote service means your agreement can be reviewed and concluded anywhere in England and Wales, usually within hours. Employers pay our legal fees directly, so our service is free to you.

For the best result, contact our solicitors as soon as you receive a draft settlement agreement. We can review early, suggest negotiation points, and prevent common pitfalls—before you are under pressure to sign.

Read about how we have helped real clients in challenging situations on our Client success stories page, or see your funding options explained here: free for employees / funding.

Frequently Asked Questions About Constructive Dismissal Settlement Advice and HMCTS Delays

How do tribunal delays affect constructive dismissal compensation offers?

Tribunal delays make employers more likely to offer higher compensation to settle early. This is because the risk, cost, and inconvenience of a delayed hearing give employees more leverage and can boost the sums on offer. Always seek legal advice to quantify the increase based on your own claim strength.

Does the HMCTS backlog extend my deadline for starting an employment claim?

No, tribunal delays do not extend the statutory deadline to bring a claim. You must initiate Acas Early Conciliation within three months less one day from your resignation date. Missing this window can lead to a lost claim, regardless of tribunal backlogs.

Can I negotiate a better settlement agreement offer due to tribunal hearing delays?

Yes, tribunal delays generally strengthen your negotiation position. Employers may pay extra to finalise matters quickly, rather than risk higher awards, legal costs, and uncertainty. Our solicitors can help you evidence and justify a higher settlement in this climate.

What evidence should I keep when tribunals are backlogged?

You should retain all correspondence, grievance documents, emails, performance reviews, and contemporaneous notes of relevant events. Delays mean memories fade and records can be lost, so create backups and organise files—this helps both during negotiations and if your case proceeds.

Is a settlement agreement better than waiting years for a constructive dismissal tribunal hearing?

A settlement agreement provides speed, certainty, and confidentiality, while avoiding the emotional and financial costs of a tribunal. However, the best outcome depends on your aims and claim strength—our solicitors will help you compare both routes.

Are settlement agreement payments for constructive dismissal tax free?

Compensation for loss of employment up to £30,000 is tax free, but sums for notice, holiday pay, and certain contractual amounts are taxable. The drafting of your agreement must specify these sums correctly to avoid future disputes or liability to HMRC.

How quickly can I sign and finalise a constructive dismissal settlement remotely?

You can sign and finalise a settlement agreement within hours, depending on how quickly you appoint a solicitor and respond to queries. Our remote process ensures advice and certification is delivered the same day in urgent cases, with funds released shortly after.

Who pays for my legal advice in a constructive dismissal settlement agreement?

Your employer pays for your independent legal advice, not you. This is a statutory requirement for a valid settlement agreement under s.203 Employment Rights Act 1996, so our advice is always free to employees.

Secure Expert Constructive Dismissal Settlement Advice Despite HMCTS Delays