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A settlement agreement is a legally binding document which an employee and an employer sign in order to terminate an employment contract. It’s sometime referred to as a ‘severance agreement’ or ‘compromise agreement’.
By signing a settlement agreement, the employer usually agrees to pay their former employee a sum of money. In return, the employee agrees not to take legal action against the employer.
Settlement agreements are often used when making employees redundant as they provide a confidential and legal method for employee and employer to part ways on agreed terms. They are also used to bring a close to claims of unfair dismissal or discrimination in the workplace.
Benefits of settlement agreements
A properly drafted settlement agreement is legally binding, which means you won’t have to worry about your former employee making further demands in the future.
What’s more, as an employer, it’s usually more cost-effective for you to make a settlement agreement with a current or former employee than allowing the dispute to reach an employment tribunal.
A specialist settlement agreement solicitor can advise you on how much a tribunal might award a disgruntled employee, so that you can make a judgment on what kind of lump sum to offer for a settlement agreement instead.
For more information on how to negotiate a successful settlement agreement, or to speak to our employment law solicitors in Bristol and South Gloucestershire, call us on 0117 325 2929 or complete our online enquiry form.