The focus of this blog is to provide a guide to employees who are contemplating entering into a settlement agreement through a Mutually Agreed Resignation Scheme (MARS), particularly within the NHS and wider public sector.

The NHS and the UK has faced significant economic and logistical challenges in recent years. One option available to employers to manage workforce restructuring is the use of settlement agreements, which can help address financial pressures while supporting organisational change.

What is a Settlement Agreement?

A settlement agreement is a legally binding contract between an employer and an employee that sets out the terms for ending the employment relationship. In most cases, it includes a financial payment to the employee in exchange for waiving their right to bring certain legal claims against the employer.

To be legally valid in the UK, the employee must receive independent legal advice on the terms of the settlement agreement. Employers typically contribute to the cost of this advice.

Settlement agreements are often used in redundancy situations, disputes, or performance-related exits. In this blog, we focus on a specific type of settlement agreement used in the public sector (most commonly the NHS): those offered under a Mutually Agreed Resignation Scheme (MARS).

What are Settlement Agreements in the Context of MARS?

In 2010, the Department of Health and Social Partnership Forum outlined a national MARS scheme distinct from redundancy and collective agreements.

This, in conjunction with the Agenda for Change has since formed the basis of further MARS schemes being used at specific trusts and organisations.

Section 20 of the NHS Terms and Conditions of Service Handbook provides detailed guidance on MARS as it relates to the NHS.

How does the MARS Settlement Agreement Process Work?

Through MARS, employees are invited to volunteer to exit employment within a time-limited window. Employees may have to fill out an application form to register their interest but simply registering for the process does not mean you are bound to complete it.

Employees can withdraw from the process at any point prior to signing their settlement agreement. Similarly, the employer is under no obligation to accept your application to the scheme.

One of the key differences between a standard settlement agreement and one offered under a MARS scheme is how the financial package is determined.

In most MARS schemes, the severance payment is calculated using a pre-determined formula based on the employee’s length of service and basic salary. This model is designed to ensure consistency and fairness across applicants, and it may include:

  • A fixed rate per year of reckonable service (e.g. half a month’s salary per full year of service).

  • A minimum and maximum cap on the total payment.

  • Exclusion of additional pay elements such as overtime or allowances.

Unlike standard settlement agreements, which are often negotiated individually and may include payment in lieu of notice, MARS payments are usually non-negotiable and do not include notice pay.

Furthermore, employees may be restricted from re-entering employment within the NHS for a set amount of time and may be required to repay part of their compensation package if they return to the NHS before a certain date.

If you volunteer and are accepted for the process, you will be provided with a settlement agreement which will include the terms for your exit from employment including your severance payment. You will be informed of your need to get independent legal advice.

At this stage, we can help to guide you through the settlement agreement in a consultation and explain to you the purpose, terms, and effects of the agreement to ensure you are comfortable continuing with the process. We will facilitate completion of the agreement and/or deal with any necessary amendments or negotiations.

If you’ve been offered a MARS Settlement Agreement or are considering applying, contact our Employment Law team for expert advice and support on 0845 287 0939, get in touch by email, or use the online chat below.