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Employment Settlement Agreements

An employment settlement agreement (previously called a compromise agreement) is the only way that an employer can be certain that an employee will not bring a claim against them.

In order for the settlement agreement to be enforceable, the employee must take independent legal advice from an employment settlement solicitor and it is usual for the employer to pay for this, the employers contribution would usually be around £250 plus Vat.

The settlement agreement will contain certain important clauses to include the employee’s agreement to waive all claims; the employee will agree to keep the settlement agreement confidential, and not to make derogatory comments about the employer, or any of their employees. It is advisable to re-state or to introduce post termination restrictions, for example that the employee is prevented from working for a competitor.

Under a employment settlement agreement (compromise agreement) the employer will pay the employee some financial compensation or a PAYE settlement agreement in return for the employee entering into the agreement but the consideration could simply be the agreement of a reference.

It is now possible for employers to have confidential pre termination discussions with their employees to attempt to negotiate the termination of the employee’s employment off the record and in order to avoid carrying out a length dismissal procedure and/or have the risk of a tribunal claim.

Our employment settlement solicitors are happy to assist in the instigation of any negotiations that are likely to lead to the termination of an employee’s employment. In addition we can draft the settlement agreement to ensure that the employer is fully protected.

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