How settlement agreements can be reached in an amicable way that suits both parties

Davenport Solicitors is a law firm specialising in employment and immigration law

If you have been offered a settlement agreement by your employer, or you are thinking of proposing one to put a fair and mutually agreed end to your employment, firstly consider it properly and seek legal advice.

Settlement agreements and the process of finding an amicable and mutually agreed way of ending an employment relationship can be an onerous task that involves a great degree of compromise along the way.

Read on to learn more about how employment settlement agreements can suit both parties.

What are the Reasons Behind Why an Employer Might Want to Go for a Settlement Agreement?     

Employers often go for a settlement agreement when they do not want to directly dismiss an employee or have to go through a long-winded redundancy process.

When offering a settlement agreement to an employee, employers present them with the opportunity to terminate the employment contract on mutually agreed terms. By opting for a settlement agreement with a member of staff, an employer does not run the risk of the employee putting in an unfair dismissal claim to a work tribunal.

However, if the employer has behaved in an improper or discriminatory way, the discussion of a settlement agreement between the two parties can be brought up during an unfair dismissal claim.

Alternatively, settlement agreements can come about when both the employer and the employee initially want to continue with the employment relationship, but then have a disagreement.

This could be a disagreement over the terms of a new employment contract such as pay or working hours. Davenport Solicitors is a law firm specialising in employment and immigration law that may be able to help you out with your settlement agreement.

Offering Reasonable Notice Periods to Employees

Settlement agreements may provide employees with reasonable notice periods, this may be a few days, or a few months. However, depending on the circumstances, some employers may try and put forward an earlier date for the mutual termination of the contract.

Notice Payments

A settlement agreement may give a notice payment for a time period before the contract is officially terminated that an employee does not have to work and leaves with immediate effect.

A notice period during which you are paid but don’t have to work is called being paid in lieu of notice. In this way, settlement agreements can be a more amicable way for employers to part ways with an employee.  

Payment and Compensation for Employees Following Settlement Agreements and Loss of Office

Settlement agreements drawn up by employers must clearly provide a breakdown of the payments owed to the employee.

As well as contractual payments, in a settlement agreement an employer can also decide to offer a compensatory lump sum payment. All compensatory payments under £30,000 can be paid to employees without tax being deducted.

When done in a friendly spirit and all of the settlement agreement procedures are followed, employment settlement agreements can suit both parties and the employee can leave in a cordial dignified manner.

Importantly for employees, being offered a mutual termination of an employment contract by an employer is very different to being sacked. A dismissal will not go on employee’s record, they will be able to safely find another job without declaring they were dismissed by a previous employee and told to leave.

In some cases, a settlement agreement can be a fairer solution for a staff member. But in cases of severe workplace misconduct, the only option may be for an employer to dismiss an employee immediately.

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