A settlement agreement, previously known as a compromise agreement, is a legally binding contract that can be used to record the basis of the termination of an employee’s contract of employment. There a number of reasons that an employer might want to use such an agreement but primarily it is used when an employer wants to dismiss an employee when there is no other potentially fair way of doing so. If an agreement is reached the employee in return for agreeing not to bring any claim against the employer, will receive a Termination Payment. To make the agreement a legally binding contract the employee requires to have legal advice on the content of the contract, for which the employer will usually agree to pay for the cost of.
We at Winrow Solicitors can assist the employee to go through the terms of the agreement or help the employer to draft it.
If you have been asked to sign a settlement agreement by your employer, please contact us so we can advise on the terms and perhaps try and negotiate an even better deal for you.
Key points about settlement agreements
- Settlement agreements are legally binding contracts that waive an individual’s rights to make a claim covered by the agreement to an employment tribunal or court.
- The agreement must be in writing.
- They usually include some form of payment to the employee and may often include a reference.
- They are voluntary.
- They can be offered at any stage of an employment relationship.