The Process of Entering into a Settlement Agreement

Being approached by your employer about a settlement agreement can seem daunting – especially if you are unsure of the process of entering into such an agreement. This guide aims to give an overview of the settlement agreement process to help answer the all important question: what happens now?  

Opening the Discussion

Employers may open a discussion about a settlement agreement either orally or in writing. From a practical point of view it is often helpful  and is common practice for an employer to bring this up with an employee in a discussion and address any issues and concerns they may have. Speaking to the employee about the proposal is often the first step in settlement agreement negotiation, however an employer may choose to put an offer in writing straight away.

Even after an initial discussion, the offer should be put in writing to avoid any misunderstanding.

A Written Offer

As previously mentioned after initial discussion of the prospect of a settlement agreement, the employer should make a written offer to the employee. A written offer will usually outline the proposed terms of the settlement agreement – including how much compensation is proposed. It is also helpful for the employer to give an indication of why the offer is being made and also that settlement agreement discussions do not form part of a disciplinary or performance management process.

Time Scale for Acceptance and Negotiation

When a written offer is made, it is helpful if the employer sets out a reasonable timescale for negotiation and acceptance.

What is a ‘reasonable’ amount of time will depend on the circumstances surrounding the offer and what both parties deem to be a reasonable time as well as any external factors that may affect the offer. 

A general rule is that a minimum period of 10 days should be allowed for the employee to consider any formal written proposal of a settlement agreement and be able to receive independent advice, unless otherwise agreed by both parties.  

If sufficient time is not allowed for consideration and negotiation, this may mean that the settlement discussions can be referred  to as evidence in a subsequent unfair dismissal claim before an employment tribunal.

It may be helpful for both parties to agree a timetable for considering and negotiating offers as well as seeking legal advice – this can assist with clarity and avoidance of unnecessary delays.

Process Practicalities

The party proposing the offer, usually the employer, should be clear about the reasons for making the proposals and be prepared to answer any questions the other party may have. 

Having multiple meetings between employer and employee can provide an opportunity to clarify any proposals and discuss any issues or answer questions. A meeting will also give an opportunity to negotiate a counter offer. 

Such meeting should be held at mutually convenient times a for both parties. The number of meetings and their length will depend on the case. Employers may also allow the employee to be accompanied by a fellow employee or trade union representative at these meetings. 

At the beginning of each meeting it is good practice to ensure that all parties are aware that anything discussed in such meetings will not be admissible as evidence in any subsequent legal proceedings should an agreement fail to be reached. Furthermore, it may also be helpful to have parties be aware of the Acas Code of Practice on Settlement Agreements booklet before the meeting in order to better understand the process.

Moreover, it should also be outlined that the discussions in the meeting and any subsequent discussions in relation to settlement agreements will not form part of any disciplinary, performance management or grievance procedure if a settlement is not reached, 

The discussion process is entirely voluntary and either party is entitled to decline to enter into settlement agreement discussions if they wish, and may refuse to continue with the process at any time. 

Payment of Settlement and Ending the Employment Relationship

The arrangements for payment and their timings should be set out in the settlemet agreement – it is good practice to have payments made as soon as is practicable after the agreement is reached.

If the settlement agreement includes that the employment relationship will be terminated, this can either be terminated by the requisite notice or by a period agreed by both parties in the settlement agreement. Where termination of employment is included in a settlement agreement, this does not automatically mean the employee has been dismissed. It may be viewed as a scenario where the parties have both mutually agreed to bring the employment contract to an end for a reason other than dismissal.

After the discussion process has been concluded a formal written agreement must be written up. It is essential that this agreement is watertight to ensure both parties get exactly what they have agreed. 

Contact Us - Settlement Agreements Glasgow

If you are an employee or employer looking for advice about a settlement agreement, or any other employment law matter, Employment Law Glasgow's specialist lawyers can help. To get in touch, please complete our online enquiry form.

When will my dismissal be fair?
Assessing which Employees are Suitable for TUPE Tr...

Related Posts

Contact Us

Invalid Input
Invalid Input
Invalid Input
Invalid Input
What type of help do you need? Invalid Input

Pick tick to confirm you have read this.
Please check the recaptcha box to continue(*)
Please complete the reCaptcha. Thank you