Settlement Agreements

Settlement Agreements arise in a number of different situations.

Sometimes individuals may be offered a Settlement Agreement as part of a standard redundancy package. This usually means the proposed dismissal won’t be that contentious, with the result the employee may have little scope to argue for improved terms. In other words, the Settlement Agreement is offered on a “take it or leave it” basis. In those circumstances the key issue is whether the sums on offer represent reasonable recompense over and above what the individual would be entitled to receive anyway without having to sign a Settlement Agreement.

Similarly, an individual may be offered severance terms following a workplace dispute, perhaps where the employer knows it may have committed a repudiatory breach of contract.  The employer will be keen to head off any potential litigation and adverse publicity. In those situations individuals can afford to look more critically at what’s being offered. In order to do so, it helps to take specialist advice so that the pros and cons of any offer can be assessed against what could be achieved if an Employment Tribunal claim or other proceedings were pursued instead.

Clearly, compensation alone shouldn’t be the sole driver and individuals should always look at the bigger picture. For example, the costs and distraction of litigation, the time and stress involved, the likelihood of securing new employment quickly, and reputational issues all need to be factored in.

Whilst most Settlement Agreements contain fairly standard provisions, individuals still need to think carefully about negotiating for the less obvious (and often overlooked) concessions from their employer. This could be anything from making the termination payments more tax efficient, securing the continuation of certain employee benefits (e.g. private health insurance, death in service and company car use), to insisting on things like the transfer of a mobile phone, PAC codes and/or laptop computers – all of which are generally of little value to employers.

There are also reputational issues to consider. For example, making sure that any internal announcement is not disparaging, and obtaining an agreed reference which is both positive but at the same time doesn’t look too contrived.

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