Settlement Agreements


Settlement agreements can be the ideal way to end employment relationships when they are no longer working for either of you.

Settlement agreements used to be known as ‘compromise agreements’ which describes, well, what happens. An arrangement is made which is a compromise between you the employer and your employee, and brings an acceptable close to the matter for both parties.

With employment legislation being such a minefield, getting it wrong can be an extremely costly business. At Reality HR, your experienced consultant will ensure you navigate settlement agreements to a safe and equitable conclusion.

The key features of settlement agreements

Settlement agreements must be voluntary, and both parties need to agree to the terms.

You would nearly always create opportunities for open discussion and negotiation before the settlement agreements are drafted and agreed.

Once the employee has signed the settlement agreement, his or her right to go to tribunal, on the matter involved in the agreement is waived.

Settlement agreements are usually confidential, so for example, if an agreement cannot be reached, details cannot be shared as part of a legal case should it ensue.

There is likely to be some settlement figure which is usually in the form of payment, but often also includes a reference for the employee.

Settlement agreements are legally binding, which is why getting them right is so crucial to your business.

What else you should know

Whilst settlement agreements are most commonly used when employment is terminated, they can be used to bring a conclusion to a workplace dispute, such as involving one of your terms of employment, for example, holiday pay.

Settlement agreements should only be used to terminate employment when you have tried to solve the issues you face, through regular dialogue and appropriate support and guidance.

If things are not working out, you need to be confident you have done all you can to support your employee. Are they a good fit for the role? Is there an opportunity for them to move to another area of the business?

You might consider asking another member of your management team to mentor the employee, in case it’s possible to resolve the issue and retain a team member who could go on to make a valuable contribution to your company.

If you are confident you have exhausted all possible options, then settlement agreements could be your most effective option.

When you work with Reality HR, we ensure that you handle settlement agreements in a way that causes the least stress possible to both you and your employee, and that is safe with regard to legislation.

Find out the improvements you could make with Reality HR on your side. Give us a call on 01256 328 428 for a chat!

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