The impact of the Coronavirus pandemic is continuing to have a serious impact on businesses and the economy. The end of the Coronavirus Job Retention Scheme (‘furlough’) on 30 September 2021 is likely to lead to an increase in redundancies and the use of Settlement Agreements to terminate employment.
A Settlement Agreement is a legally binding contract between an employer and an employee whereby, in return for an enhanced payment, the employee agrees to waive the right to bring any kind of legal action against the employer in respect of their employment or its termination.
A Settlement Agreement is often used in a redundancy situation to terminate the employment on mutually agreed terms. It can also be used where the employment is ongoing, but both parties want to settle a dispute between them and bring the employment relationship to a quick end on agreed financial terms. This avoids the need for the parties to get embroiled in a lengthy performance management or dismissal process.
Under the terms of a Settlement Agreement, the employee will be paid an additional sum of money, known as a ‘compensation’ or ‘termination’ payment for the loss of employment. In addition, the employee will receive a payment in lieu of notice and a payment for accrued but untaken holiday. The amount of the compensatory payment will depend upon the individual circumstances of the case and the strength of any potential claims the employee may have against the employer.
An employee is under no obligation to accept the terms of a settlement offer and, as a general rule, should be given a minimum of 10 days to consider the terms offered. It is a legal requirement for an employee to obtain independent legal advice on the terms and effect of a Settlement Agreement before signing it. The employer will generally make a contribution towards the employee’s legal fees, providing the Agreement is signed.
Bringing and defending a claim in the Employment Tribunal can be an expensive, lengthy and incredibly stressful process. A realistic settlement package can often represent a good outcome, for employees and employers alike, and bring a degree of closure to a difficult situation.
For more information and to find out how we can help you, please contact us on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.