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You may decide to offer an employee a Settlement Agreement (formally known as a Compromise Agreement) in a number of situations. For example, if your relationship with them has irretrievably broken down, in redundancy situations where you want to make an enhanced payment to the employee or where you have come to a mutual agreement to end the employment.
A Settlement Agreement can be a valuable document for an employer, particularly where the employee is aggrieved or upset. It is a legally binding agreement which draws a line under any issues surrounding the employment. The employee waives their rights to bring a claim against their employer in return for a payment and perhaps an agreed form of reference. Payments can usually be paid tax free up to a total of £30,000.
A Settlement Agreement has to follow a certain form in order to comply with the legislation, and the employee needs to take independent legal advice on the Settlement Agreement in order for it to be binding and to prohibit them from bringing claims against you.
We can advise you on whether a Settlement Agreement is appropriate and on the level of compensation to offer. We can also prepare the Settlement Agreement for you and guide you through the whole process as painlessly as possible.
Head of Employment & Intellectual Property