Settlement / Compromise Agreements
Settlement Agreements (previously known as Compromise Agreements) are increasingly being offered by employers when there is a dispute or when making people redundant. This can apply in both large and small companies.
The purpose of these is to make a speedy and efficient settlement so that both parties can move on.
A Settlement Agreement is only valid if the employee is advised by a solicitor and to ensure this happens the employer contributes to the costs and we can advise you on how to do this and how much you may be entitled to receive.
We have answered some common questions below.
- What is a Settlement Agreement?
- It is a legally binding agreement following notification of a dispute or the termination of your employment. Usually it covers any severance payment, notice period, payment in lieu etc.
- What is the benefit for the employee?
- Employees get subsidised legal advice as part of the package. You get prompt payment of any settlement and there is no need to go to a tribunal.
- Often a reference is agreed as part of the agreement and is therefore binding
- What is the benefit for the Employer?
- By accepting a Settlement Agreement the employee agrees not to pursue any claim they may have to an employment tribunal and the employer knows that there are no future liabilities.
- What does it typically cover?
- In the case of redundancy it usually covers any severance payment, notice period and unused holiday entitlement etc.
- Confidentiality, both in terms of your employers trade secrets and business affairs, and also of the terms of the agreement.
- You will usually be required not to make any derogatory comments against your employer. This could be made mutual.
- It may confirm any existing post-termination restrictive covenants in your existing contract of employment. For example ability to work for a competitor or your ability to service existing clients and customers in a new job.
- A list of statutes in the Settlement agreement (such as the Race Discrimination Act, Sex Discrimination Act, Employment Rights Act) and many more, under which you will agree not to bring a claim.
- The Settlement agreement is intended to be in full and final settlement of all claims.
- Are payments tax free?
- Usually payments up to £30,000 compensation can be paid without deduction but you should speak to us about this complex issue.
- What happens if at the end of the discussion if I do not wish to sign?
- You do not have to sign, you can take your case to an Employment Tribunal but you may end with the legal minimum, and most Settlement Agreements offer above this. The costs associated with issuing a claim are between £160-£250 and for an actual hearing it is between £230-£950.
- When will I get payment?
- Typically under 14 days but it may depend on when your employer runs the payroll.