What are Settlement Agreements?

Settlement Agreements are legally binding agreements in which the employee agrees not to pursue any claim they may have to an employment tribunal and in return the employer usually provides a severance payment. Notice, as outlined in the contract of employment, is usually included in the agreement and generally provides for a “payment in lieu”.

Settlement Agreements are recognised by statute law.

The employee must seek advice from an independent solicitor before the agreement becomes binding.  The solicitor giving the advice must also sign the agreement and certify that the appropriate advice has been given.

What terms does a Settlement Agreements have to contain?

The Settlement Agreements will state the full breakdown of the payments to be made to the employee and the extent to which the sums will be paid free of tax.

Settlement Agreements also provide for confidentiality both in terms of business affairs and also of the
terms of the agreement and usually contain a mutually applicable clause about derogatory comments.

The Settlement Agreements may confirm the existing post-termination restrictive covenants that the employee is already bound by under their contract of employment. In some cases the covenants may be new.

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The Settlement Agreements folder provides a check list for managers, a model settlement agreement and a template letter to initiate a settlement discussion.

Settlement Agreements

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