Settlement agreements were introduced in 2013 to allow employers to have confidential settlement negotiations with an employee. They are designed to bring an end to a dispute by mutual agreement (most commonly to bring an end to the employment relationship without the need to follow a drawn out procedure).
Settlement Agreements have to be in writing and signed by both parties to be legally binding. Crucially, the employee agrees to waive their right to bring a Tribunal claim. In exchange, the employer agrees to pay a ‘settlement sum’ to the employee, which may be similar to a redundancy package. A reference is often central to negotiations because this can be beneficial to an employee, who now needs to seek alternative employment.
The advantage of settlement agreements from an employer’s perspective is clear: they often save the business significant time and money. Even if you follow a fair procedure, it can take a long time for warnings to build up to a level at which you could reasonably terminate their employment. Despite often having entirely fair reasons for dismissal, this won’t prevent someone from bringing a claim – as they may feel that they have nothing to lose and plenty of time on their hands if they haven’t found a new job yet. With a successful settlement agreement, there is no threat of a Tribunal claim whatsoever.
Discussions about settlement agreements, if completed the right way, are ‘without prejudice’, which means that even if the negotiations subsequently break down and no agreement can be reached, the employee cannot usually raise the discussions as evidence of pre-determination.
More and more of Peninsula’s clients are turning to the Peninsula Face2Face service to conduct these discussions on their behalf, with currently around 90% resulting in agreements. Experience shows that employees were more comfortable to open up to someone external to their business, and often admit that the employee themselves actually wanted to walk away but didn’t want to, or didn’t know how to, say this to their manager. Often such relationships involve a personal friendship, and such discussions can show both parties are relieved when this option was put on the table.
For further information on how our HRface2Face Team can help with such Settlement Meetings, please call a member of the Peninsula Face2Face team on 0844 892 3911.