Settlement agreements can be a useful commercial tool for employers who wish to exit an employee from their organisation but not all employers are aware of them.
A settlement agreement is a legally binding contract that prevents an employee from making a claim that is covered by the agreement to an employment tribunal or court. The employee usually enters into the agreement in exchange for a payment from the employer.
Settlement agreements can be used in many different situations. Common scenarios where you may want to think about whether a settlement agreement could be a beneficial option for your organisation are if:
- You are finding a formal process such as a performance management procedure too slow or burdensome
- You wish to end an employment relationship but it’s unlikely a fair dismissal could be achieved
- You are dealing with a difficult employee or issue and there is a risk of a claim against your organisation
- You are offering an enhanced redundancy payment for voluntary redundancy
Whilst settlement agreements are most frequently used to end the employment relationship on agreed terms, they can be used to resolve an individual matter without terminating the employment.
It’s important to bear in mind that settlement agreements are voluntary and to be legally binding they must meet certain legal requirements, one of which is that the employee needs to receive independent legal advice on the terms and effect of the agreement.
In light of the above, if you are considering offering a settlement agreement to an employee, it’s important that you discuss your situation with an employment law expert before taking any action.
Specialist Settlement Agreement Service for Employers
Kingfisher* offer a cost effective settlement agreement service. As part of this we can advise you on the facts of your case, including settlement agreement discussions and the rules around these, draft a bespoke settlement agreement to meet your needs and negotiate with the employee’s representative on your behalf in accordance with your instructions.
If you would like further information regarding settlement agreements, including the fixed fee in place for our settlement agreement service, please contact your Employment Law Specialist who will be happy to help.
*Kingfisher refers to Kingfisher Professional Services Ltd