A Settlement Agreement is a document pulled together as a result of a discussion resolving an issue in the workplace.
Most commonly this is likely to be terminating employment in a way that is acceptable to both you as the employer and your employee.
I know you’re probably shaking your head by now. You’re not used to me writing like this.
The truth is, as we all know, employment legislation is a huge minefield, and getting it wrong can be an extremely costly business. However, with the appropriate support and guidance, a settlement agreement can be the ideal way to end an employment relationship, when it is no longer working for either party.
Settlement agreements used to be known as compromise agreements, which is actually a pretty good description. It is a compromise between you and your employee, with you both agreeing to some form of action to bring an acceptable close to the matter.
What are the key features?
- The agreement is voluntary – both parties need to agree to the terms
- Open discussion and negotiation is likely to take place before the agreement is drawn up
- Once signed, the employee waives their right to go to tribunal
- They are usually confidential – so if agreement cannot be reached, details cannot be shared as part of a legal case
- There is likely to be some settlement figure – usually payment, but often also a reference for the employee
- They are legally binding – which is why getting them right is so crucial
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 terms of employment such as holiday pay.
Clearly, this is not the ideal way to just “get rid” of a troublesome employee. If you are experiencing problems with a member of your team you should be having regular dialogue in an effort to resolve the problems.
Be sure you are providing the appropriate support and guidance, and consider asking another member of your management team to mentor your employee.
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?
If you are confident you have exhausted all possible options, then a settlement agreement could be an effective tool.
But whatever you do, don’t just launch into a discussion with your employee about settling. Seek professional advice, to ensure you get the best outcome for your business, and a satisfactory one for your staff member.