The Benefits of a Settlement Agreement
When faced with an employment dispute or when handling situations like redundancy, you will often come across settlement agreements in the workplace. These are legally binding contracts between an employer and an employee and are designed to bring a situation or dispute to an end by mutual agreement.
For example, if you are being offered redundancy, any settlement agreement should set out the terms and conditions both parties need to adhere to as well as any financial payment to the individual who is being let go. It can include terms like a confidentiality clause where each side promises not speak ill of the other.
If there is a dispute over pay with a particular employee, a settlement agreement can define the way this is going to be rectified. This kind of legal document can also be used when someone is being fired because of poor performance but the company wants to avoid any potential for a claim for unfair dismissal.
There are benefits for both the employer and employee in using a settlement agreement:
- First and foremost, it allows everyone to make a clean break and draw a line under what can be a potentially difficult situation for both parties.
- It provides a legal framework to ensure that each side keeps to its part of the agreement.
- It can help avoid lengthy periods of negotiation or court costs if there are major disputes between the parties.
- For the employer, it provides the certainty that they are not going to face legal proceedings further down the road.
- For the employee, it means they get the financial recompense they are looking for.
Using settlement agreements also help employers avoid any bad publicity that could effect their future financial success. That’s because an agreement usually has a clause in it that prevents either side from denigrating the other. This actually works both ways, especially if the employee is looking to find work and needs a reference.
Settlement agreements also work quite well in ensuring that both employer and employee part company on reasonably good terms. That means issues don’t start to escalate and both parties can then move on. The result of escalation is usually taking a complaint or issue to a tribunal which can be costly to everyone involved, not only in terms of money but time as well.
The key benefit of any settlement agreement is that it sets out the terms of the dispute, what is going to be done to settle it and how the parties are going to behave towards each other. Before they can be signed, settlement agreements need to be approved by an independent legal advisor acting for the employee. Getting the wording right and the terms and conditions is therefore very important.
If you are being asked to sign a settlement agreement or you are an employer that needs one, getting the right legal advice is important to avoid any mistakes. At Forster Dean, we are experienced at providing advice, support and guidance for employment law.
Contact us today if you would like to discuss any aspect of settlement agreements.