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  • Helen Manson

A settlement agreement doesn't have to be a fight.....


....if you handle discussions compassionately and create a sense of partnership with the employee. In the first of our 4 part blog on settlement agreements, we look at what a settlement agreement is and when you might use it.

You may have an employee whose employment, you feel, has run its course. This may be because the relationship has deteriorated so much that it is difficult to imagine it ever recovering or because of a particular dispute. An alternative to following your standard HR policies and procedures is to use a Settlement Agreement, which will allow you to reach a mutual agreement to end the employment relationship.

A settlement agreement is a legally binding contract. It can be proposed by an employer or employee but it would normally be the employer. Once a valid settlement agreement has been signed, the employee will be unable to make an employment tribunal claim about any claim which is listed on the agreement.

It is sometimes a far more compassionate way of dealing with an employee rather than putting them through a disciplinary process for example.

A good example of when a settlement agreement may also be appropriate is if you have a long serving, loyal employee who is technically excellent, but you have serious concerns with their managerial ability. There have been numerous complaints about their management style. But overall, you have a good loyal employee who you do not wish to take through the disciplinary procedure and you are not able to put them in a position where they are not required to manage a team.

Settlement negotiations can be the most difficult conversations a manager or HR practitioner can have. Although there are instances in which an employee is amenable to settlement and the process can run quite smoothly, negotiating a settlement with an employee who is initially resistant to the process can be difficult.

To enable a successful outcome, it is important that the manager or HR practitioner creates a sense of partnership with the employee and to work with them to find mutually agreeable terms. When you initially suggest to someone that you would like to discuss ending their employment, whether in a dispute or not, they are likely to be very defensive, emotional and their thoughts will be ‘how am I going to pay the mortgage?’, ‘how will I be able to look after my children’?

A settlement agreement does not have to be drafted by a solicitor. You can obtain a good settlement agreement from an HR practitioner. However, the employee concerned must have received advice from a relevant independent advisor such as a lawyer.

In our next blog, read about approaching the settlement discussion.


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