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Why it often pays to settle with your employee

Why it often pays to settle with your employee

It’s never an easy decision to come to, but not all staff are the right fit for a company, and as an employer this is one of the tough business decisions you are likely to have to take on numerous occasions throughout your business journey. If you are going to part ways with a member of staff, employers must be careful how they do it, whatever the reason for dismissal. If not, an employee could make a claim for unfair dismissal.

Rather than going down the formal disciplinary process, one way of cleanly terminating an employment contract, with no risk of repercussions, is to offer the member of staff a Settlement Agreement. A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding agreement between an employer and employee and must adhere to certain statutory requirements. It’s an agreement that is mutually agreed between an employer and employee and typically offers the employee a sum of money to help them move on, in exchange for a promise by the employee not to pursue an employment tribunal claim.

Emotions can run high when an employee faces losing their job. Benefits of using a Settlement Agreement include:

  •  the circumstances leading to your employee’s contract being terminated will remain confidential, protecting your business from a potential PR nightmare,
  • the settlement payment proposed will also remain confidential,
  • it prevents the employee from making adverse and derogatory comments about you or your company,
  • it provides the employer with certainty that the employee will not pursue any claims against the company,
  • it mitigates the risk, including the expense, uncertainty and time associated with an employment tribunal claim,
  • it can obtain closure in a difficult situation when internal procedures to resolve the issue have failed,
  • it can end a dispute quickly.

Settlement agreements are widely used by employers as a standard approach to avoiding or settling workplace disputes in matters such as:

  • Executive severance and senior level exits,
  • if an employee is subject to disciplinary action, or
  • where an employee is being made redundant.

At times when other business matters and economic markets can be outwith your control, terminating an employee’s contract of employment on mutually agreeable terms via a Settlement Agreement, offering peace of mind to the employer and a quick and clean outcome, is a very attractive solution. Get in touch to find out more about how Ness Gallagher can assist your business with Settlement Agreements.