What is a settlement agreement?
Settlement agreements, formerly known as compromise agreements, are legally binding documents which set out the terms and conditions agreed by those involved when they agree to settle a potential employment tribunal claim; claims or other court proceedings.
Settlement agreements are normally used to bring an employment relationship to an end in a mutually agreed way. They are often used when both employer and employee feel that their employment relationship is no longer working, in these circumstances both parties can agree the basis for bringing the employment to an end.
What employees need to know:
Do I have to sign a settlement agreement?
As an employee, you do not have to sign a settlement agreement offered to you by your employer. You can choose to reject, accept or negotiate the terms of the settlement agreement. It is important to note that the employer may not be willing to negotiate the terms of the settlement agreement, and if refused to sign, they may take a different approach to terminate your employment.
Is a settlement agreement the same as redundancy?
Settlement agreements and redundancies are two separate forms of an employer parting ways with its employee. With settlement agreements, the terms can be decided between the two parties – this is contrast to redundancies as the laws surrounding them are extensive and mean protocols need to be followed.
Within a settlement agreement, an employee is also handed the choice. This is not the case for a redundancy as the employer will make the final decision and although this could be challenged, they usually have little choice but to accept the redundancy.
What employers need to know:
Will a settlement agreement cost more than a redundancy?
As an employer, a settlement agreement will usually cost more than a typical redundancy. Within settlement agreements ‘severance pay’ received is likely to be higher than the standard calculated redundancy pay. However, it does allow for the employment to be terminated at a quicker rate and it prevents the employee entering an employment-related claim against the business.
How can Lamb Brooks help
If you have been offered a settlement agreement by your employer and this is something you would like to discuss, we have specialists who can help to advise. Get in touch with one of the team on 01256 844888 or enquiries@lambbrooks.com.