When can my employer offer a Settlement Agreement?

You need to have an employment contract for a Settlement Agreement to be an option for your employer. If you don’t have a contract, or are self-employed, or are working through a third party, your circumstances may be different.

If you do have an employment contract, a Settlement Agreement may be used in the following situations (though there may be more examples too):

When there’s been a breakdown in the working relationship

A breakdown in the working relationship may occur in a number of different ways. It may occur generically between an employer and an employee, or more specifically between a manager or a colleague and an employee. In any of these circumstances, however, it is still possible for the parting to be carried out on an agreeable and amicable basis. A Settlement Agreement will set out the terms for what that basis is.

In the case of redundancy

When an employer decides to pay more than the basic statutory redundancy pay entitlement to an employee they wish to make redundant, a Settlement Agreement is often the method used to achieve this. The terms of the redundancy, including the sum to be paid, will be set out in this agreement.

When there is a capability and/or poor performance issue

If, having followed the correct procedures, an employer is still not happy with the quality and standard of work being carried out by an employee, then they might look to offer a Settlement Agreement. This might be in lieu of going through a formal performance improvement plan in order to settle the matter in a shorter period of time.

When there is a disciplinary matter

Instead of asking an employee to face a disciplinary hearing, an employer may choose to offer the employee a Settlement Agreement instead. This offer can be made before, during, or even at the end of the disciplinary procedure.

If an employee has a grievance

If an employee has a grievance or potential claim to make against an employer for the way they have been treated, this matter may be settled via a Settlement Agreement.

If an employee is not capable of working due to illness

In the case of an employee’s inability to do their job due to illness, a Settlement Agreement may be a preferable and more constructive means of dealing with the circumstances to everyone’s satisfaction.

In all cases, it is critical that you obtain advice from a person who is suitably qualified to deal with Settlement Agreements. Once all parties have signed a Settlement Agreement the terms cannot be changed. If you are in the situation where you have been offered a Settlement Agreement and are looking for advice, please do contact on 0800 304 7255 as soon as possible.


View Archive


View useful employment law related links.

Click here

Sign up for latest Employment Updates