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By Spencers Solicitors

  Spencers Solicitors    
  June 15, 2021

5 Facts You Need To Know About Employment Settlement Agreements

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Employment settlement agreements may sound scary but they are used quite often by employers and solicitors will advise on several agreements each week. Whilst it potentially conjures thoughts of leaving your job, that’s not necessarily true in all circumstances and there can be a lot of benefits for the employee.

What is a settlement agreement?

Let’s start with the definition. An employment settlement agreement is an agreement between employee and employer which is used to resolve a dispute and/or agree the terms on which the employment relationship ends. It is essentially a compensation payment that is made to keep something confidential.

The agreement is legally binding and usually involves financial compensation – or other benefits – in return for not carrying on with an internal process, such as a grievance or disciplinary, or pursuing an issue to an Employment Tribunal. It is formerly known as a compromise agreement.

Why would someone make you an offer?

There are numerous situations when you might be offered an employment settlement agreement but the overarching reason is usually to ensure a clean and quick solution to an issue.

The most common reasons for an employment settlement agreement are:

  • Redundancy
  • Grievance
  • Discrimination
  • Misconduct
  • Poor performance

What are the best things about an employment settlement offer?

There are numerous benefits to an employment settlement agreement, but only in the event that you’ve been offered a fair deal.

  • Payment can be tax free – payments of up to £30,000 can be made tax-free if it is a compensation payment
  • Cheaper and quicker process than an employment tribunal
  • Brings closure to a potentially distressing time in your life
  • You can negotiate a better deal with your solicitor
  • You can choose to include an agreed reference from your employer, helping you secure employment in the future.

Can you negotiate or reject a settlement offer?

The simple answer to this is yes and it is one of the benefits of the employment settlement agreement.

Any offer that is made to you can be weighed against your own expectations. If it is close to the terms you want, you are within your rights to negotiate for better terms, including a higher settlement payment.

Alternatively, you can refuse a settlement discussion with your employer and still make a claim to the Employment Tribunal. This does make the process a lot longer, but if the offer made by your employer is unreasonable, this may be your best option.

Do I need a solicitor?

An employment settlement agreement is legally binding. However, to make it legally binding, you must receive advice from a solicitor.

If a solicitor advises that your offer is not a good deal, it is likely they will recommend either asking for an increased settlement payment or pursuing the issue through the Employment Tribunal – something that the employer is probably trying to avoid. In the event of this happening, a solicitor will act on your behalf, working on the negotiations behind the scenes and ensuring that you are advised appropriately throughout.

For expert advice on employment settlement agreements, please contact our team at Spencers Solicitors today.


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