EMPLOYMENT LAW FOR BUSINESSES
SETTLEMENT AGREEMENTS
A settlement agreement is a written agreement between the employer and the employee outlining the terms of the termination. A settlement agreement can be used where you do not want to go through the procedure of formally dismissing an employee or where you are concerned about a potential claim being brought against the company in the future.
The settlement agreement will set out the terms of termination. Often the employer will agree to pay the employee a sum of money (the termination payment). In return the employee will agree to waive any potential claims against the employer now and in the future. The employer may also insist on additional clauses being included such as confidentiality provisions and restrictive covenants.
For the agreement to be legally binding the employee will need to get independent legal advice on the contents of the agreement. The legal advisor will also need to sign a certificate confirming that they have provided the employee with advice. Employers generally pay for the legal advice up to a certain fee which will depend on the circumstances.
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