Table of Contents
A settlement agreement is basically a form of legally binding contract that enables both employee and employer to part company on terms agreeable to both parties.
On the employee’s part you will waive (or give up) any right to bring a claim (within limits) against your employer. The benefit to you could be that you require a good reference or even getting your job back after being sacked.
The most common reasons, especially recently, are where an employee is being made redundant and they agree to sever the employment.
The terms of a settlement agreement are mutually agreed by both the employer and the employee. These terms will include details of an agreed settlement sum for the employee in exchange for agreeing to make no further claims of the employer.
Settlement Agreement Content
There are benefits to both parties when entering into a settlement agreement as the terms mutually agreed by both parties.
A specific settlement agreement is needed for each individual employee in line with their circumstances. The terms should always include a clearly expressed disclaimer covering any specific claims which the employee may have in the future.
The agreement should also include a clear breakdown of the total sum which is to be paid to the employee and whether this is a tax free sum or not. However, making a tax-free payment can be complicated and it’s always best to get specialist advice before making any commitment.
When it comes to the amount of any settlement payment to an employee, this will very much depend on each individual’s circumstances. Considerations can range from how long the employee has been employed to the circumstances around why a settlement agreement is being offered.
Importantly for the employee, there is sometimes a clause included in the agreement that the employer will give him or her a reference as part of the deal.
A settlement agreement will include a confidentiality clause, stating that the employee will keep the terms of the agreement, the settlement amount and the reasons for the agreement confidential.
Statutory Requirements in a Settlement Agreement
For a settlement agreement to be legally binding, it will need to meet a number of statutory requirements, including details of why the agreement is being entered into.
We always strongly advise employees to get professional, legal advice on the terms of any settlement agreement proposed by their employer prior to signing. This adviser must be clearly identified in the written agreement and their advice must be covered by insurance.
If the settlement agreement does not meet all statutory requirements, then it will not be valid, leaving room for an employee to bring claims against the employer. This is why employers too should seek the advice of a legal advisor when it comes to preparing settlement agreements.
Settlement Agreements By Swansea Legal Services
Settlement agreements are a very useful way of ensuring that disputes between an employer and an employee are resolved without the need for legal action.
At Swansea Legal Solutions, we have direct experience of acting for employees of a number of large organisations . This service has been in particular demand recently due to the Covid-19 pandemic where employers are left with no option other than to make employees, who were previously on furlough, redundant.
To find out more about our settlement agreement or other commercial services, click here https://www.swansealegalsolutions.co.uk/business-legal-and-hr-services or you can call a member of our team on the number below:
