A Settlement Agreement (formally known as a Compromise Agreement) is a legally binding contract made between an employee and employer.

This usually provides for a severance payment by the employer in return for your agreement not to pursue any claims in a Tribunal or a Court. The employer will usually require you to keep the terms, for example the amount and the surrounding circumstances of your contract’s termination, confidential.

The main benefits of employment settlement agreements are that they can be used:

  • to secure financial compensation for ill-treatment at work without having to face the delays, stress and uncertainty of an Employment Tribunal
  • to negotiate a payment that is better than any statutory minimum (e.g. for notice period, holiday pay, redundancy pay)
  • to obtain non-financial payments included as part of your settlement package (see below for more detail)
  • to make the most tax-efficient use of a compensation payment
  • to get final legal closure to an employment dispute in the fastest possible time
  • to make a clean break from work before it reaches a stressful and possibly unpleasant conclusion.

So, for example, if your employer has suggested you’re underperforming, instead of trying to prove otherwise, you could suggest ending the employment on agreed terms. Performance management is stressful for all concerned, therefore a settlement agreement may be beneficial for both the employer and employee.

For more information, contact our specialist team on 01792 468684 or email enquiries@pgmsolicitors.co.uk.

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