What is a settlement agreement and its benefits?

A  Settlement Agreement’ (previously known as a compromise agreement) is recognised by statute as a legally binding contract made between an employer and employee, either towards the end or just after employment has terminated. It sets out  the terms of departure between the parties and once signed, prohibits the employee from bringing legal action against the employer in respect of his employment and/or its termination. This is usually in exchange for a termination payment, and other benefits which are also set out in the agreement. The main benefit of entering into a settlement agreement is to provide certainty between the parties, and a clean  amicable break with your employer. You will invariably receive a tax efficient payment under the agreement, together with a job reference and clauses ensuring that your employer does not bad mouth you. In turn, your employer will be able to safeguard that you do not make any future legal claim against them. The settlement agreement will only become binding once you have received independent legal advice on it, usually by a qualified solicitor, and that solicitor has attached a certificate confirming the advice that has been given. Once concluded, it is as if an employment tribunal has made an order at full hearing- there is no going back. Settlement Agreements can be used in many circumstances, including the following (whether or not there is a prior dispute):

• Redundancy;
• Performance management at work;
• Long-term sickness;
• Clash of personalities; 
• Transfer of a business;
• As a means of settling a grievance.

With the outcome of many employment tribunal claims being uncertain and potentially costly, the settlement agreement route facilitates an easy, amicable, and speedy resolution of the ending of your employment relationship. Click here for a comprehensive list of the more usual terms found in a settlement agreement. Click here to contact us or call 020 7100 5256 and ask for Philip Landau or email him at pl@landaulaw.co.uk