A: Settlement Agreements (formerly known as Compromise Agreements) are legally binding agreements between you as an employer and your employee. It is usual for a Settlement Agreement to be entered into shortly before or after the termination of your employee’s contract.
This allows a clean break where your employee agrees to waive their right to make a claim in return for an agreed sum of compensation.
It is a legal requirement that your employee receives independent legal advice before entering into a Settlement Agreement. As the employer, you would usually pay a fixed sum contribution towards the cost of this legal advice.
Where a number of redundancies are being made, it is often more efficient for one firm to advise all of your employees. It is perfectly legitimate for you, the employer, to choose a firm that offers such a bulk Settlement Agreement sign-off service.
However, every staff member would still have the right to choose their own Employment Law solicitor instead. If you do decide to nominate one firm to perform this role, make sure you advise your employees of their right to instruct an alternative Employment solicitor should they so wish.
Of course, there are many benefits of using one firm to sign off multiple Settlement Agreements. As well as getting an efficient service, you may be able to have all the Agreements signed on your own premises over a day or two. You may also be able to negotiate a lower contribution for each Settlement Agreement.
If you do instruct one law firm to act for your employees, that firm will negotiate with your own legal team or solicitors if they encounter any problems with the Settlement Agreements.
To make the process as straightforward as possible, it is important that you involve specialist employment law solicitors on your behalf in both the drafting of the Settlement Agreements and advising on your proposed enhanced settlement terms.
If an employee is not satisfied with the compensation or terms of a Settlement Agreement they are under no obligation to sign.
Depending on the situation in which the Settlement Agreement has been offered, the employer may then want to follow a fair redundancy process or place the employee on a Performance Improvement Plan (PIP) or follow a fair disciplinary process.
It is important to seek Employment Law advice to ensure that these processes are lawful, fair and transparent. If an employer does not comply with the law when carrying out redundancies, dismissals or capability dismissals they will be at risk of the employee bringing claims against them in the Employment Tribunal.
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