When to Settle for a Settlement Agreement

Settlement Agreements, formerly known as Compromise Agreements, are widely used by employers for a variety of different reasons. They generally involve the employer paying an employee an additional amount that they are not contractually or legally entitled to, in exchange for the employee giving up any claims they may have against their employer.  

Many employees are unaware of their existence or the fact that they are widely used, as there are usually strict confidentiality requirements. They are used in situations varying from voluntary redundancy to settling a claim in the Employment Tribunal.  

In order for a Settlement Agreement to be valid, the employee is required to obtain independent legal advice. The employer usually pays the employees legal fees in obtaining this advice. The employee needs to be advised on the potential claims they may have against their employer in order to understand what claims they are settling by signing the Agreement.  

Employees are often given a short time frame by their employer to consider the Agreement that has been offered to them. This time frame can often be extended by Agreement between the parties. It is, however, not unusual for Agreements to be finalised within a week or two.  

If an employee is unhappy with the terms of the Settlement Agreement they have been offered, it is important to note that there is often room for negotiation. At BTMK, we are often successful in obtaining an increase in the amount offered. This is also a good opportunity for the employee to consider whether any post-termination restrictions (also known as restrictive covenants) are likely to cause difficulty in obtaining new employment. Again, it is often possible to negotiate the term or limit of these restrictions. It is normally in the employee’s interest for a reference to also be annexed or attached to the Agreement.  

If you are an employee who has been offered a Settlement Agreement or an employer who wishes to offer one, we can assist throughout the process. Please contact Kristie Willis on 01702 238529 or [email protected] for further details.

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