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When facing a dispute or the potential for a dispute with an employee, offering a settlement agreement is often the swiftest, most cost-effective way of dealing with the situation.
With a settlement agreement, you can protect yourself and your business against the risk of legal action while keeping the details of an employment dispute private. They can be used both when terminating an employee or to resolve an issue such as allegations of harassment or discrimination where an employee may continue to work for you.
At BakerLaw, our employment lawyers are experienced in drafting, reviewing or advising on settlement agreements and negotiating terms with employees on behalf of the employer to conclude matters swiftly and cost effectively.
Settlement agreements (previously known as compromise agreements) are an agreement commonly signed by an employee and employer on termination of an employee’s employment. The agreement terminates the Contract of Employment on the terms set out in the agreement. By signing the agreement, an employee agrees to waive their rights to bring certain claims against their employer, normally in respect of their employment and/or the termination of their employment.
In order for the agreement to be legally binding, employees are required to seek independent legal advice from a relevant adviser, such as a solicitor, on the terms and effect of signing the agreement. We can provide this legal advice, either to individual employees or to numerous employees where more than one employee is exiting the business.
The employer will normally pay a contribution towards an employee’s legal fees for taking advice on the terms and effect of any settlement agreement. Generally, this contribution will not include any legal fees incurred in negotiating the terms.
We are experienced at drafting, reviewing or advising on settlement agreements and negotiating terms with employees on behalf of the employer to conclude matters swiftly and cost effectively.
If you require a settlement agreement or would like to discuss proposals to terminate one or more employees’ employment, please contact us.
You can get in touch with your local BakerLaw office in or, if you prefer, you can email us at firstname.lastname@example.org.
Our expertise with settlement agreements
Drafting settlement agreements
Our solicitors can work with you to create a settlement agreement that protects the business’ interests, while offering sufficient incentive to prompt an employee to sign a settlement agreement. We have the experience to ensure all angles are considered and the settlement agreement is tailored to your business’ needs and requirements. We can ensure that any potential future problems are accounted for, giving you peace of mind.
Providing independent legal advice on settlement agreements for employees
We are able to provide independent legal advice for employees on the terms of a settlement agreement. Provision of this legal advice is a requirement for the agreement to be legally binding. We will make sure the employee understands the agreement they are entering into and the claims they are waiving leaving no room for confusion or future disputes.
Negotiating terms of settlement agreements
Where there is the need to negotiate the terms of a settlement with an employee, our settlement agreement lawyers can help you prepare for negotiations, including advising on those aspects that can or should be negotiated or to handle the entire process for you. This makes it as simple as possible for you to get a fair settlement in place while being confident you are protecting your business and complying with all aspects of employment law.
Mass settlement advice
We regularly provide advice on the terms of settlement agreements to numerous employees working for the same employer where there is more than one settlement agreement offered, perhaps because multiple employees are being made redundant. We can normally do this on the same day to prevent delay. Seeing multiple employees on the same day can make the process much faster and more cost-effective.
Taking action if the terms of a settlement agreement are breached
It is common for a settlement agreement to include a non-disclosure agreement (NDA) preventing the employee from discussing the terms of the settlement or the nature of the dispute it relates to. If an employee breaches an NDA or any other terms of a settlement (such as a non-compete clause), we can advise on your options and the best course of action based on your objective.
Settlement agreements for employers explained
What is a settlement agreement?
Settlement agreements (previously known as compromise agreements) are an agreement commonly signed by an employee and employer on termination of an employee’s employment.
The agreement terminates the Contract of Employment on the terms set out in the agreement. By signing the agreement an employee agrees to waive their rights to bring certain claims against their employer, normally in respect of their employment and/or termination of their employment.
Are settlement agreements legally binding?
An employment settlement agreement will be legally binding if the following conditions are met:
- It is in writing
- It relates to a specific complaint or issue
- It is signed by both employer and employee
- The employee enters into the agreement voluntarily
- The employee receives independent legal advice before signing
- The employee is given proper time to consider the agreement
- The identity of the employee’s legal adviser is recorded in the agreement
- The agreement states the statutory conditions regulating the settlement
What happens if an employee breaches a settlement agreement?
If an employee breaches the terms of a settlement agreement, such as a non-disclosure agreement or non-compete clause, you may be able to take legal action against them for breach of contract.
How long does a settlement agreement take?
This depends on the situation, but the main factor is usually the time you need to give the employee to consider the agreement. We can advise you in respect of applicable timescales and consider the best way to proceed. Normally, allowing time to have the settlement drafted and discuss it with the employee, it can be possible to get a settlement in place in about two weeks.
When can you offer a settlement agreement?
You can offer a settlement agreement at various times, including:
- When making an employee redundant
- When terminating an employee’s employment for any other reason, such as gross misconduct or poor performance
- To deal with an issue such as accusations of harassment and discrimination
- Any other time where an employment dispute has been raised or there is room for a potential dispute you would prefer to head off
How do you calculate a settlement agreement?
This will depend on the nature of the dispute or potential dispute, but you should consider the likely settlement an employment tribunal might award in the event an employee made a successful claim when deciding how much it is appropriate to offer.
Our settlement agreement fees
How much does a settlement agreement cost? For an employer, this question is of paramount importance as avoiding unnecessary cost is usually one of the top reasons for offering a settlement.
In some cases, we may be able to act on a fixed fee basis (for drafting a settlement agreement or providing independent advice to an employee on the terms of a settlement). This will give you complete certainty over the costs involved.
Where you need ongoing support, we will typically charge a fixed hourly rate. In such cases, all work will be agreed in advance, so you stay in control of the cost of resolving your dispute at all times.
Find out more about our pricing.
Contact our settlement agreement solicitors in Farnham
If you are an employer looking to swiftly resolve an employment dispute or head off a potential employment dispute with a settlement agreement, our expert team can help.