Settlement Agreements are legally binding agreements which are used to formalise a full and final settlement between an employer and an employee, which ultimately prevents an employee from bringing a claim before an Employment Tribunal or any claim in the future. Certain claims, though, cannot be waived (including the right to whistleblowing and TUPE).

 

However, it is important to note that it is entirely up to the individual to decide whether he/she wants to accept the offer – you cannot force someone to accept a Settlement Agreement.

 

If an employee does not accept the offer, technically they will remain in employment unless, and until, their employment comes to an end in another way or unless they have already been formally dismissed.

 

Settlement Agreements must comply with a number of conditions laid down in law and there are many things to consider when seeking advice on a settlement agreement, but some of the most frequent issues are:

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• Calculation of what constitutes a ‘fair’ payment

• Tax implications of the termination payment

• Provision of a reference

• Cost contribution for the independent advice

• Reminder of existing restrictive covenants and confidentiality clauses and provision for any new clauses

• Provision for resignation from office of Director

• Tax indemnity