A settlement agreement is an agreement within which an employee or worker agrees not to pursue certain claims against their employer or any potential respondent. They used to be called compromise agreements and, therefore, your employer may refer to it as a compromise agreement rather than a settlement agreement.
Settlement agreements are commonly used to record an employee’s terms of their departure from a business. A settlement agreement usually includes a termination payment paid to the employee or worker but some settlement agreements simply offer an agreed reference in return for the employee signing the agreement. By signing the agreement, the employee or worker waives their right to bring certain claims against the employer or potential respondent.
ACAS also has a useful guide to settlement agreements which can be found here.