Learn about Employers Settlement Agreement
A Settlement Agreement, formally known as a Compromise Agreement, is a confidential document that will prevent an employee from pursuing their employment rights in return for a financial package.
When will a Settlement Agreement arise?
A Settlement Agreement can arise for a number of reasons, for example, redundancy, absence, disciplinary or grievance issue or simply because both the employer and employee would like to part company.
What should be in the Settlement Agreement?
The employer will provide the Settlement Agreement to the employee. It is important that the business is sufficiently protected by having the appropriate clauses included, for example, that the circumstances and terms of the Settlement Agreement must remain confidential other than any exceptions such as professional advisers for the purposes of providing advice.
Should I pay for my employee to seek legal advice?
It is a requirement of the Settlement Agreement that the employee seeks legal advice from an independent adviser and usual for the employer to contribute towards that legal advice, on the assumption that they enter into it. It will be for you to decide how much you would like to contribute. We find that the contribution can be in the region of £250.00 plus VAT upwards.
How long should I allow my employee to reflect on the settlement?
It will be for you to decide what timeframe you would like to work towards, however, guidance provided by ACAS (the Advisory, Conciliation and Arbitration Service) suggests 10 calendar days. Employers often provide the outline package to the employee and, if agreed in principal, will then issue the Settlement Agreement.
What if my employee or their adviser asks for changes to the Settlement Agreement?
It will be for you to decide whether to accept or reject any suggested amendments to the Settlement Agreement. If any amendments are agreed, a revised Settlement Agreement will be issued.
Should I ask my employee to enter into a Settlement Agreement at all?
It will be for you to decide whether it is the right decision to explore the possibility of settlement. The purpose of the Settlement Agreement is to prevent an employee from pursuing their employment rights and so employers may consider that this is a sensible course of action rather than to incur the time and cost associated with addressing any ongoing internal matters or where there is concern about a prospective claim arising.