A Settlement Agreement is a crucial legal document that outlines the terms of a binding settlement between you and your employer. Typically, this involves an agreed upon severance payment in exchange for your promise not to pursue any legal action in a Tribunal or Court.
Confidentiality is also a key component of the agreement, with employers often insisting on keeping all aspects of the contract termination confidential.
Why do you need a solicitor for a Settlement Agreement?
To ensure your employment compromise agreement is legally binding, it must be signed off by a solicitor, certified trade union, or adviser.
A skilled settlement agreement solicitor can assess the strength of your claim and estimate the compensation you may receive at an employment tribunal. They will also uncover any potential discrimination against you, such as if you have a disability and are entitled to reasonable adjustments before being dismissed.
With their expertise, you can avoid missing out on compensation for injury to feelings and other damages.
Why would an employer offer a Settlement Agreement?
Employers often use settlement agreements to reach a mutually agreed upon termination with employees. This offers a clean break and avoids the possibility of legal action for additional compensation.
Settlement Agreements are commonly used in cases where a lengthy and tedious process such as a performance review or redundancy process is not desirable. Additionally, they may be used to avoid potential claims for constructive dismissal and discrimination from employees who have raised grievances or reported discrimination.
Are Settlement Agreements the same as redundancy?
A Settlement Agreement is often used as an option for employees facing redundancy. However, it should not be confused with redundancy itself.
Employers must follow a fair redundancy procedure and can offer a Settlement Agreement as an alternative, whereby the employee waives their right to this procedure in exchange for enhanced redundancy pay.
It is not mandatory for the employee to accept this agreement, and seeking legal advice to ensure fair terms and amount is recommended.
How much will a Settlement Agreement cost?
Your employer will typically pay a contribution of £350-£500 (plus VAT) towards your legal fees for a Settlement Agreement, which should cover everything in a straightforward matter.
If there are more complex issues, your employer may pay up to £1,500, especially if complicated post-termination covenants or a second signing is required while you work your notice.
At Martin Searle Solicitors, we aim to seek payment from your employer instead of you. If you are being offered insufficient compensation, we have several funding alternatives to explore. We’ll ask your employer first to contribute more, especially if the issues are complex. We can check if you have legal expenses on your home contents/buildings insurance or you can pay the difference between your employer’s contribution and the total bill based on our individual private fee rates. In all cases, we offer a deferred fee arrangement.
What are the benefits of a settlement agreement?
Settlement agreements offer employees and employers a clear documentation of terms, allowing for financial certainty and the opportunity to negotiate benefits that a tribunal cannot order. They also provide a sense of peace of mind as employers can avoid future claims against them. In addition, settlement agreements save on litigation costs and stress, offer tax-efficient structures, and allow for a clean break from stressful situations.
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Parting thoughts
Employment settlement agreements are an important tool for employers and employees to resolve workplace disputes. They provide a mutually agreed upon solution that can benefit both parties, offering financial support to the employee and protecting the employer from costly legal action.
Additionally, also include provisions that protect the employer’s interests, such as indemnification for any taxes or other liabilities they may incur. By using settlement agreements, employers and employees can come to an amicable resolution without having to go through costly litigation.
