Offered a Settlement Agreement While Off Sick? What Happens to Your Sick Pay, Employment and Legal Rights
This article explains what happens when an employee is offered a settlement agreement while off sick, including during long-term sickness absence. It covers how accepting an agreement may affect Statutory Sick Pay (SSP), contractual sick pay, notice pay, employment benefits and the proposed leaving date. It also explains when disability protections under the Equality Act 2010 may apply and which employment rights an employee may be asked to give up. Further guidance covers negotiating an offer, requesting more time, solicitor fees and obtaining independent legal advice before signing.
Settlement Agreements During Sickness Absence
Find Out How Your Leaving Date Could Affect Your Sick Pay, Notice Pay and Employment Rights Before You Agree to the Terms
Being off sick does not prevent your employer from offering you a settlement agreement.
However, if you're receiving sick pay, undergoing treatment or hoping to return to work, it's important to understand how the agreement could affect your position before accepting.
Your employer may have offered you a payment to bring your employment to an agreed end.
But what happens to the sick pay you currently receive?
Will you be entitled to your normal wages during your notice period?
And could your health condition affect the employment rights you're being asked to give up?
You may also have been given a deadline to respond, even though you're still unwell.
Before making a decision, you need to know what payments you're entitled to, when your employment would end and whether the proposed terms properly account for your circumstances.
Your employer can offer you a settlement agreement while you're signed off sick, including during long-term sickness absence.
You do not have to accept it, and receiving an offer does not mean your employment has already ended.
A settlement agreement may include compensation, notice pay and other outstanding payments.
It will also identify employment claims you're agreeing not to pursue.
If you decide not to accept, your employer may need to consider other ways of addressing the situation.
Where dismissal on grounds of ill-health capability is being considered, a separate employment process and legal requirements may apply.
The proposed leaving date is particularly important because it can affect your remaining sick pay and employment benefits.
What Happens to Your Sick Pay If You Accept a Settlement Agreement?
Find Out What Sick Pay You Could Still Receive and How Your Proposed Leaving Date Changes the Financial Picture
Statutory Sick Pay (SSP) is payable for up to 28 weeks, subject to eligibility.
For the 2026/27 tax year, the weekly rate is £123.25 or 80% of your average weekly earnings, whichever is lower.
SSP normally stops when your employment ends, even if you're still unwell.
If your employer provides company sick pay, you may receive more than the statutory amount.
Your entitlement depends on your employment contract and sickness policy.
For example, someone who still has several months of contractual sick pay available may be in a different financial position from someone whose entitlement has already ended.
If your employer proposes an earlier leaving date, it's worth establishing what sick pay you would otherwise be entitled to and how that compares with the settlement offer.
Our settlement agreement solicitors can help you understand how the proposed terms affect your financial position.
Will You Receive Full Notice Pay While Off Sick?
See How Your Contractual Notice Period and the Way Your Employment Ends Could Affect Your Final Payment
Being off sick doesn't necessarily mean you'll receive sick pay rather than your normal wages during your notice period.
Where an employer dismisses an employee, the statutory rules can require full normal pay during notice if the contractual notice period is less than one week longer than the statutory entitlement.
If the contractual notice period is at least one week longer, the employee may instead receive the pay applicable to their sickness absence.
A settlement agreement may provide for payment in lieu of notice, meaning employment ends without the notice period being worked.
Before accepting the offer, it's important to understand how your notice pay has been calculated and whether it reflects your contractual and statutory entitlements.
The position will depend on how your employment is ending.
Settlement Agreements and Disability Discrimination
Establish Whether Disability Protections Need to Be Considered
Some illnesses and health conditions qualify as disabilities under the Equality Act 2010.
Generally, this applies where a physical or mental impairment has a substantial and long-term effect on normal day-to-day activities.
Certain conditions receive specific protection under the law.
If your condition meets the legal definition of a disability, your employer may have additional responsibilities, including making reasonable adjustments where required.
A settlement agreement can ask you to give up the right to pursue specified employment claims, including disability discrimination claims.
It's important to understand which claims the agreement covers and whether anything about your employer's handling of your sickness absence needs closer examination.
Settlement Agreement Checklist While Off Sick
Identify Which Payments, Employment Benefits and Legal Rights Need Reviewing in Your Particular Circumstances
Two employees offered the same settlement payment could be in very different positions if one is receiving company sick pay and the other has already exhausted their entitlement.
The proposed leaving date, notice arrangements and employment rights can all affect what an agreement means for you.
The table below shows some of the circumstances that may apply to you, what needs reviewing and how our
Employment Law team can help.
| If This Sounds Like You | What Needs Checking | Why It Matters | How Ellis Hass Helps |
|---|---|---|---|
| “I'm still receiving sick pay. What happens if I leave?” | Your remaining statutory or contractual sick pay entitlement and proposed leaving date. | Ending employment may bring sick pay to an end sooner than expected. | We review the payment terms and explain how the proposed leaving date could affect your income. |
| “I'm off sick, but my agreement includes notice pay.” | Your notice periods and how the proposed payment has been calculated. | The amount you’re entitled to may differ depending on how your employment ends. | We examine the notice arrangements and identify anything that needs further attention. |
| “My health condition has kept me off work for months.” | Whether disability protections apply and which claims the agreement covers. | You may have employment rights that should be examined before signing. | We explain which rights you’re being asked to give up and whether your circumstances raise further issues. |
| “I receive benefits through work as well as sick pay.” | Medical insurance, income protection and other contractual benefits. | Some benefits may change or end when employment ends, depending on the scheme rules. | We review the relevant terms and identify benefits that may need further investigation. |
| “I'm not sure whether I'll be able to return to work.” | The proposed leaving date, your employment circumstances and the claims being settled. | Signing may end your employment while your longer-term position remains uncertain. | We help you understand what the agreement would mean and whether any terms should be discussed. |
| “I've been given a deadline, but I'm still unwell.” | The time available for independent advice and any adjustments you may need. | You need sufficient time to understand the agreement before deciding. | We can discuss the deadline and whether requesting more time may be appropriate. |
You should normally be given at least ten calendar days to consider a formal written settlement agreement offer and obtain independent legal advice, unless a different period is agreed.
If your illness or treatment means you need longer, you can ask your employer for more time.
Specialist Settlement Agreement Legal Advice
Have Your Sick Pay, Employment Rights and Settlement Terms Reviewed by an Experienced Employment Law Team
When you've been offered a settlement agreement during sickness absence, the advice needs to take account of your circumstances as well as the wording of the agreement.
Our specialist Employment Law team has extensive experience advising employees on settlement agreements and employment rights.
A legally valid settlement agreement requires qualifying independent advice about its terms and effect on your ability to pursue the relevant claims.
Our Employment Law team provides settlement agreement legal advice to employees across the UK.
We act for you, not your employer, and can help you understand:
- Your financial position: How sick pay, notice pay, outstanding payments and the proposed leaving date fit together.
- Your employment rights: Which claims the agreement asks you to settle and whether your circumstances raise additional issues.
- Your proposed terms: Whether any payments or conditions need further discussion before you sign.
Settlement Agreement FAQs for Employees Off Sick
Get Answers on Refusing an Offer, Negotiating Payments, Solicitor Fees, Medical Information and What Happens Next
Settlement Agreement Advice From Our Employment Law Team
Discuss the Offer You've Received, Your Sickness Absence and Any Signing Deadline During an Initial Advice Call
If you've received a settlement agreement while off sick, it's important to know what accepting it could mean for your income and employment rights.
During an initial advice call, you can explain your sickness absence, the offer you've received and any deadline your employer has set.
We can discuss your situation and explain the next steps towards obtaining independent legal advice on the agreement.
Arrange An Initial Advice Call
with Ellis Hass to discuss your settlement agreement before signing.
Our specialist Employment Law Solicitors advise employees who have received a Settlement Agreement, helping them understand the terms, what they are agreeing to and whether any points need further discussion before they sign.
The team has experience across a wide range of industries and circumstances, and can provide advice tailored to your individual situation.
I cannot recommend Ellis Hass & Co Solicitors highly enough, they have been outstanding throughout my case.
They kept me informed throughout the process, explained everything clearly, and always made time to answer any questions I had.
I am extremely grateful for all their hard work and would not hesitate to recommend Ellis Hass & Co Solicitors to anyone in need of legal support.
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