What are they?
Settlement Agreements are legally binding agreements between an employer and an employee. They are usually offered as an alternative to going through a formal disciplinary, capability or redundancy procedure.
Typically these agreements confirm the following:
- The termination date when the employee’s employment will come to an end.
- Whether an employee will work their notice period, be placed on garden leave for some/ all of their notice period or be paid in lieu of notice.
- That an employee will be paid in lieu of accrued but untaken holiday as at the termination date.
- An ex-gratia payment which can be taken tax-free up to £30,000.
- Ongoing confidentiality obligations and continuation of any restrictive covenants contained in the employment contract.
All employees are required to take independent legal advice on the terms of a Settlement Agreement. This is because when signing a Settlement Agreement, an employee agrees to waive their employment rights usually in return for an enhanced financial package.
Your employer will usually make a contribution towards your legal costs in obtaining advice on the terms of the Agreement.
How can we help?
If you have been offered a Settlement Agreement, our Employment Team will use their expertise to review the terms of the Agreement and ensure you are getting a fair deal.
Our Employment Team review Settlement Agreements in all sectors of work. Recently, they have supported NHS employees who have been offered voluntary severance packages in accordance with the ‘Mutually Agreed Resignation Scheme’ (MARS Scheme).