Everything You Need to Know About Settlement Agreements
October 14, 2021

All About Settlement Agreements

Regrettably, not every relationship between an employer and an employee lasts. Thus, it is not uncommon for potential claims to materialise after an employee is told that their contract is due to cease, especially if they feel there is no just cause for the decision made against them. Whether the employee is factually or morally at fault or not, a legally bound agreement of this kind can be used to step in and settle any discrepancies before they spiral further.


What Is A Settlement Agreement Between An Employer/Employee?

In a situation where an employee voices a complaint following the news of a job loss, a settlement agreement is usually offered to prevent the claim from going to court and causing upset, financial loss, reputational damage, and more. Settlement agreements are often used by HR departments as a more amicable, mutually beneficial, and hassle-free way of severing an employment contract before it crosses over into the messy realms of legal proceedings.

What Are The Reasons For A Settlement Agreement?

There are countless reasons as to why a settlement agreement is offered to an employee, including, but not limited to:

  • If the job role is no longer needed, or if redundancy is in discussion
  • If an employee is underperforming within their role or not completing tasks to the standard expected of them
  • If an employee does something wrong at work, or if they break the trust of their employer and cannot regain it (in instances such as stealing, harassment, verbal abuse, etc.)

If you are unsure whether your situation could be resolved by using a settlement agreement, contact Bowsers Solicitors for free, expert advice today.

What Should Be Included In A Settlement Agreement?

A settlement agreement is legally binding, therefore both employer and employee must stick to the obligations outlined before agreeing and signing to the terms. A settlement agreement can include, but is not limited to:

  • Details of the employee’s notice period
  • Details of outstanding holiday pay/allowance
  • Details of the settlement package, including any compensation which will be paid to the employee, which is tax-free up to a certain amount
  • Details of any references provided by the employer
  • Details of any claims settled (if applicable)

If you would like to know more about what to include in a settlement agreement (as an employer) or what you might find in one (as an employee), contact Bowsers Solicitors for further advice today.


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