What Is A Settlement Agreement?

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A Settlement Agreement (previously referred to as Compromise Agreement) is a way whereby an employer and employee can part company on agreed terms. By signing a Settlement Agreement an employee gives up their right to bring any claims against the employer. An employee will receive a financial payment for agreeing to a Settlement Agreement. An employer or employee can suggest a Settlement Agreement.

What does a ‘without prejudice’ and ‘protected conversation under Section 111A’ conversation mean?
  • In layman’s terms – a discussion that cannot be used in court as evidence in legal proceedings.
  • Cannot be referred to in an unfair dismissal claim even where there was no dispute.
What are the advantages?
  • Can provide a quick resolution to a situation and where the employment relationship is not working
  • Avoid stress for both parties
  • Usually provides an element of financial gain for the employee
What are the disadvantages?
  • An increased financial sum for the employer
  • Employee may not agree to an Settlement Agreement
  • Damage to employee relations within the wider company if used inappropriately.
In order for the Settlement Agreement to be legally effective the employee must receive independent legal advice about it. Employers usually contribute a sum of money for the employee to receive advice on the Settlement Agreement. Any further advice, the employee would need to fund themselves.

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