Settlement Agreement between Employer and Employee

Settlement Agreement between an employer and employee is an option which is worth considering when the employment relationship breaks down to such extent that it becomes necessary to bring the working relationship to an end.

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Settlement Agreement – Legal advice

Settlement Agreement – What is it?

Settlement Agreement is a legally binding agreement, entered into voluntarily and agreed through negotiation, which sets out the financial and other terms on which an employer and employee will go their separate ways. A settlement agreement will guarantee that an employee can’t bring a claim against you.

Usually settlement agreements include a severance payment made by the employer in return for the employee agreeing not to bring certain legal claims. You can download our full guide on settlement agreements here. Settlement agreements are a good way to avoid costly and time-consuming disputes, whether in the Employment Tribunal or otherwise.

Why use a Settlement Agreement?

There are various circumstances in which a settlement agreement may be appropriate. Some employers choose to use settlement agreements even where there is little or no risk of a claim because it kills off the threat of a claim. Others use settlement agreements where, perhaps for commercial reason, they do not have the time nor inclination to go through a full performance management or disciplinary process and therefore at greater risk of a claim. They can be offered at any stage in the employment relationship and the offer can be made regardless of whether any disciplinary or grievance process is underway.

Settlement Agreement – What does it include?

Every settlement is unique because the circumstances of each case will be different.  However, there are some elements that are common to most agreements. Typically, they will contain details of:

  • the amount of money to be paid
  • any restrictions on the employee’s future employment
  • confidential business matters
  • the reference that will be provided by the employer if requested by a future employer
  • whether there will be an announcement made to the employee’s colleagues/clients
  • a mutual agreement that the parties will not make derogatory comments about each other.

 Settlement Agreement – Contact us for Legal Advice

Contact our lawyers in Carter Lemon Camerons Solicitors for advice on employment matters. The specialist team at Carter Lemon Camerons Solicitors can assist you with all employment-related matters including settlement agreements. Our years of expertise in these areas mean that we can provide tailored solutions for your business, making sure that you are in the best possible position to defend potential claims. For more details, please contact Kate Boguslawska or Andrew Firman, partners in our employment team at Carter Lemon Camerons or call us on +44 (0) 20 7406 1018.