Top 8 things that should be included in a settlement agreement to make it rock solid

things included in a settlement agreement

 

 

If you’re reading this post, you’re probably thinking: What should be included in a settlement agreement?

It’s a good question, and it’s one we’re going to answer in good detail – but first, let’s start with the basics.

 

What is a settlement agreement?

A settlement agreement is where an employee gives up their right to sue an employer after they leave. Usually they are not leaving voluntarily. A settlement agreement includes the details of the payment the employee will receive when they leave, leaves their role, often as part of a redundancy.

After everything is agreed on the employee’s exit, they will not be able to bring a case to an employment tribunal for any reason, including discrimination.

It’s an important agreement for a lot of reasons, which is why it’s super important that you include everything in your settlement agreement to stop your employee suing you after they have left.

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What is a reasonable settlement agreement?

What is a reasonable settlement agreement?If you’re reading this, chances are you want to find out more about settlement agreements; and more importantly – what is a reasonable settlement agreement?

You might want to know what a reasonable settlement agreement might be in your particular situation.

And you also might want to know what your next steps could be to try and solve your current problem.

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Settlement Agreements

What is a Settlement Agreement

It is difficult sometimes to get rid of an employee. The law requires you go through a process that sometimes can be very lengthy. There is a quicker way to do this: settlement agreements.

What is a settlement agreement?

A settlement agreement is the name of an agreement that can be a very neat and tidy, albeit sometimes expensive way to part company with an employee. It is an agreement where you give the ex-employee money, and they agree not to sue you.

You can use a settlement agreement at any time in the employment relationship, whether there is already a dispute (disciplinary, grievance) or not (they are just not suitable for the role, but you know they will kick off if you try to dismiss them).

A settlement agreement used to be called a compromise agreement.

Why would I need a settlement agreement?

The aim of a settlement agreement is to part company quickly whilst you take away the employee’s ability to sue you at employment tribunal, for almost anything related to their employment.

For them to give up this right, you have to give them money. The settlement agreement sets out clearly what monies they will get, and what rights to sue you they have given up.

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Your Invalid Agreement

We’ve had a rash of settlement agreements to draw up recently.

Usually, we’re asked to do these because the business doesn’t want to go through a lengthy redundancy process before possibly parting company.

However, the struggle is usually getting the business to understand that they are not just paying the employee their notice to go.

They have to pay them more than that (sometimes much more) as they’re actually paying them for giving up their right to sue the business.

And you have to pay tax and NI on notice periods, even under a settlement agreement.

So, to work out how much you should be paying, as a minimum, you need to pay them their notice period PLUS what they would have got if they had been made redundant PLUS a sum for giving up their right to sue you.

This only works as a ballpark figure if we are talking about unfair dismissal – if it’s discrimination, then you really need to be willing to offer at least one year’s pay.

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Filling the GAP in HR Services: Settling down

As you might expect, we’re very busy at the moment.

Clearly, we’re heavily involved in several restructuring projects, but we’re also dealing with long-term sickness absences and a few – believe it or not – disciplinary processes.

One of our key roles in all people management issues is to ensure our clients follow all the correct processes, and if they do, they give themselves the very best chance of being protected.

We can’t stop an employee starting a tribunal, especially now they’re free.

But by making sure a fair and reasonable process is followed, we minimise the danger of an ambulance chaser solicitor seeing pound signs when they hear what has been going on.

In 95% of the processes we carry out, just following the correct process and guidelines is enough to make sure that there is no Early Conciliation or tribunal claim.

But for the other 5% we have an ace up our sleeve – settlement agreements.

What is a “settlement agreement”?

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Filling the GAP in HR services: Automatically unfair

We had a call from a company the other day who’d received an Early Conciliation claim for their apprentice. They’d spoken to ACAS, who’d told them they had no choice but to pay it, but – not really happy with that advice – they’d turned to us for help. Unfortunately for them, we had to … Read more

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