Creating a mutually beneficial Settlement Agreement

When an employer wishes to terminate a contract with an employee they may offer a Settlement Agreement. Employment ends for a variety of reasons, including disputes, disciplinary proceedings or restructuring. All the terms on which the employment relationship finishes are detailed in the Settlement Agreement.

The terms usually include financial compensation in return for an employee agreeing to disregard any claims against the employer. If accepted, an employee would not be able to pursue any claims such as unfair dismissal or discrimination. The monies agreed should cover the amount an employee would be likely to receive at an Employment Tribunal. It may be mutually beneficial for both the employer and the employee to consider accepting the sum in full and final settlement. This enables both parties to avoid the cost and stress of a tribunal.

Settlement Agreements are also provided in redundancy situations where the employer is prepared to enhance the employee’s entitlement. Statutory redundancy payments are calculated by a rigid formula which often leaves employees feeling that the sum offered is modest, especially as the redundancy may be beyond their control. When employers are prepared to offer increased redundancy payments they want confirmation that the employee will not be seeking to claim unfair dismissal.

To ensure a settlement agreement is fair and based on the facts related to the employer’s desire to end the contract, it is a legal requirement that employees receive independent legal advice, ideally from a specialist employment solicitor, or other legal professional who is adequately insured.

The employer usually pays towards the employee’s legal fees with the contribution confirmed in the agreement. Once both parties sign the settlement agreement it becomes legally binding.

For independent advice about your Settlement Agreement please call us, recommended employment solicitors on 0113 320 5000.