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Sadly, not all professional relationships work out. Sometimes it is necessary for an employer and employee to come to agreement that the job is not quite working out.
It might be for a number of reasons like the employee is not suitable for the role and therefore not performing as expected, or it could be that the amount of work has ceased, and redundancies are required. In these situations, a Settlement Agreement can be used to give both the employer and employee peace of mind and additional benefits to accompany that peace of mind.
What is a settlement agreement?
A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding agreement between an employer and employee. It is usual for the employer to pay an enhanced amount to the employee (above the statutory sums due to them) in exchange for the employee waiving their rights to sue the employer in a Court or Employment Tribunal.
Due to the nature of the claims the employee is waiving, it is a requirement that that employee be legally advised as to his rights contained in the agreement by a solicitor, or other such qualified legal representative.
How we can help your business
Here are Oakwood Solicitors Ltd, we have a dedicated team of employment solicitors who have many years of experience in advising and assisting businesses with the drafting of settlement agreements.
We can assist you at an early stage in dealing with an issue that could lead to a settlement agreement, that with some legal assistance could otherwise be avoided.
If this is not the case, we can supply you with specific and tailored advice, and where possible draft and provide a settlement agreement within 24 hours (provided we have been given all the relevant information and documentation). Our aim is to turnaround the initial draft of a settlement agreement within a 24 hour period.
Drafting settlement agreements forms part of our Employment Law and HR Package (fixed fee retainer) – click here to find out more.
Does the employee have to take the offer?
No. Your employee may turn down the terms of the agreement. This would often open a period of negotiation between the parties.
Timing is often key with settlement agreements and we would suggest that if it looks like you might have an issue that could lead to a settlement agreement that you should engage Oakwood Solicitors’ Employment team as early in the process as possible to ensure you receive the maximum benefit from our advice.
My employee has asked for a settlement agreement. What should I do?
In certain situations, an employee may simply come to you and ask for a clean break and suggest doing this via a settlement agreement. This is likely when the employer/employee relationship has completely broken down (in their opinion). Triggers for such a request might be the employee has raised a formal grievance and you have not upheld this, or alternatively you have disciplined the employee and they did not agree with the outcome following your formal process.
It may suit the business for a disgruntled employee to leave, and you may be open to exploring this eventuality, but there is no obligation on you to accept any offer put forward by an employee.
How much are the usual payouts?
This is very difficult to say as it will depend on the employee’s individual terms and conditions (such as salary, holiday pay etc) and the individual’s circumstances. However, most settlement agreements will compromise the employees notice pay, any accrued but untaken holiday pay, any bonus or commission payments due and some compensation for loss of office (also referred to as an ex gratia payment).
Under current tax legislation, and as long as the payment is not contractual (detailed in their employment contract), a maximum sum of £30,000 can be paid to the employee tax free.
Do I have to pay my employee’s legal fees?
If you offer an employee a settlement agreement, as they are required to take legal advice on this to make the agreement binding, it is commonplace for the employer to make a contribution towards the employee’s legal fees. Contributions vary depending on the issues contained in the agreement, complexity of the agreement and the seniority of the employee.
Oakwood Solicitors can advise you on the correct level of contributions when drafting the agreement for you. If you would like to speak to our specialist Employment Lawyers, please call 0113 200 9948 for a no-charge initial consultation.
Why should I choose Oakwood Solicitors Ltd?
You will have a dedicated advisor who will see your claim through from start to finish, assisting you in the event of any queries or issues you may have.
Your case handler will also continue to provide regular updates until the conclusion of your claim, ensuring the process is as stress-free and effortless as possible.
If you believe or feel you have a claim, contact us for a free initial consultation regarding your options: