Settlement Agreements

Key considerations for business owners

All business owners review staffing levels with a view to reducing headcount and costs.

Depending on the number of positions they are looking to remove, they need to consider the best route to end an employment relationship, and legal advice should be sought.

Employers engaging in redundancy settlements do not need a Settlement Agreement, but they may want to consider having them to control the prospect of any future Employment  Tribunal claims. It gives certainty to the terms as well as being legally binding between the employer and the employee if drafted correctly. It is usually entered into shortly before or after the termination of the employee’s contract of employment.

The benefit of using this type of agreement is that it provides a clean break with the employee agreeing to waive their rights to make a claim, instead receiving an agreed amount of financial compensation. It can also include agreed references, extra protection on confidentiality and other warranties from the employee.

Each employee must obtain independent legal advice before entering into a Settlement Agreement if it is to be binding, which the employer usually contributes a fixed sum towards the cost of. It can be a more cost effective and a faster, more efficient process for all employees to be offered one independent legal advisor to do this work.

Where one law firm is appointed to sign off multiple Settlement Agreements it will be a faster and more efficient service, and it can be cheaper for the employer rather than dealing with several lawyers. Employees do still have the right to choose their own solicitor if they wish to do so.

We regularly act as sole independent adviser for a group of employees and recently did so where the employer was making multiple redundancies and offering settlement agreements.  After speaking to each employee individually and making sure they understood the terms of the agreement, they were all signed, and the process concluded swiftly.

Not only did this help to reduce costs for the employer, it also allowed for the faster conclusion of the matter for all parties, allowing employees to seek alternative employment opportunities and the employer to progress with their future plans for the business.

If you would like to discuss drafting a Settlement Agreement or for legal advice on offering Settlement Agreement assistance to your employees, please get in touch today.

Amanda Finn can be contacted on a.finn@gullands.com