Yes, a settlement agreement can be offered even during illness. In fact, your employer may present you with a VSO at any time, but you are never obliged to sign it. During illness, the legal notice ban, which gives you additional protection against dismissal. If you sign anyway, you waive that protection and there may be consequences for your entitlement to benefits or your financial position. It is therefore wise to always have a VSO in case of illness checked by an employment lawyer first, to make sure the terms are correct and whether there is room for a better arrangement.