Many organisations seem to be restructuring and reorganising at present. Often they do at this time of year.
A new structure or a new boss can change an employee’s fit within an organisation. if so, it may be that termination of employment for whatever reason is discussed.
If an employer wants to end an employee’s employment without having a fair reason or following a fair process, one way of achieving that is to offer a settlement agreement. An employee cannot be forced or required to leave a job but a settlement agreement can be a solution for both employer and employee. For employers, care is needed before embarking on such an offer, good HR advice is essential. An employee may know nothing about the proposal until a meeting takes place and they are handed an agreement or its later sent to them.
What is a settlement agreement?
So, what is a settlement agreement. It’s a formal contract setting out the terms on which employment will end.
What will it say?
The precise terms will depend on the situation but it usually covers:
- the date the employment will end;
- what will happen in the period up to termination;
- what will happen about any holiday due or owed;
- what will happen about any benefits, such as a company car, health insurance, share options or other employee benefits;
- what, if anything, the employee is required to do up to ending of employment or when it ends, such as completing a particular task or returning property;
- a reference for the employee; and
- a payment to the employee after the ending of their employment to compensate them.
What is different about a settlement agreement to other contracts is that employees must have legal advice for it to be binding. The effect of the agreement is that the employee waives any claim that he or she may have to the employment tribunal. Without legal advice that waiver and the agreement is not binding.
Why do I as an employee need legal advice?
Because of the imbalance in the relationship between employer and employee. As the employee is waiving their legal remedies they need to be sure that both the compensation to be paid and the terms the employer is imposing are fair.
Who pays for the advice?
Usually the employer pays a contribution towards the fees. Whether that will cover all the employee’s fees will depend on the amount offered and the extent of advice required. Sometimes, the amount offered can be negotiated.
If you would like to discuss your settlement agreement call me on 0770 6351563.