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Settlement Agreements

Employment relations problems occur in most workplaces. An employer might be unhappy with an employee’s performance or behaviour, or an employee may feel disgruntled about the way they are being treated, or the work they are being asked to carry out.

Settlement agreements are a tool used to deal with some workplace problems. They are most commonly used to help end an employment relationship in a mutually acceptable way.

What is a Settlement Agreement?

A contract made between an Employee and Employer which agrees the leaving terms.  It prevents an Employee from bringing a legal action and in return they receive a termination payment.

How can Wake Smith help with a Settlement Agreement?

  • We offer same day appointments.
  • Advise on the effect of signing the Settlement Agreement.
  • Go through alternatives available to you.
  • Provide fixed costs which will not exceed those paid by your Employer.

What are the benefits of a Settlement Agreement?

Settlement agreements offer certainty.  The parties achieve a clean break, the Employer knows that no claims will be brought, and the Employee receives a sum of money.

What things are usually dealt with in a Settlement Agreement?

  • A termination date. The date that the Employee will leave.
  • Reason for termination. Not essential, and often described as “mutual agreement”.
  • The most important part for the Employee and is often described as the termination payment.
  • Will the Employee work their notice or will they be paid instead of working?
  • An Employer doesn’t have to give a reference, but if one is to be given then it can sometimes be set out in the Agreement.
  • It is usual to put a clause in that provides that neither the Employer nor the Employee will talk about the terms of the Agreement.
  • Restrictive Covenants. If the Employee has post-termination restrictions in their Contract of Employment then these can often be referred to in the Agreement.
  • Legal Fees. The Employer usually pays the Employee’s legal fees.

When can a Settlement Agreement be discussed?

Settlement agreements can be discussed in many different situations, whether during or after employment.  They can be used to avoid a protracted disciplinary or redundancy process or where there is an ongoing dispute between the Employer and the Employee. Some Employers ask for them as a matter of course when anyone leaves their business.

How quickly can they be agreed?

An Employer normally writes to the Employee explaining their reason for wanting to agree terms and setting out those terms. There can sometimes be a meeting after that. The Employee has 10 days to think about the offer.

More details can be found at the ACAS Code of Practice for Settlement Agreements www.acas.org.uk

When should you contact Wake Smith?

Give us a call if you have already been offered a Settlement Agreement; if you want to try and negotiate an agreement with your Employer or Employee or if you want to know if your current offer is fair.

Employment Team

Mark Serby
Director & Head of Employment Law

Holly Dobson
Director

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