If you’re unhappy in your current role, you may feel like it’s time to leave. The best approach may be to enter into a settlement agreement.
Your employment will continue unless your employer dismisses you or you decide to resign. In this article, you’ll learn why a settlement agreement is usually better than both of these options.
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Why is a settlement agreement better than being dismissed?
For you as an employee, a dismissal won’t look good on your employment history. Even if undeserved, it may not be easy to persuade a prospective employer that you were mistreated.
When a settlement agreement is used, you can agree on a reference and a reason for termination that protects your reputation.
From an employer’s point of view, they won’t want to risk an employment tribunal claim if they can avoid it. They would have to prove they had a fair reason to dismiss you. There are only six potentially fair reasons recognised by law:
- Misconduct
- Poor performance
- Redundancy
- Continued employment would break the law (eg someone is employed as a lorry driver but loses their licence)
- Retirement (in some circumstances)
- Some other substantial reason (eg a personality clash in the workplace or a business reorganisation)
Even if they can show a fair reason, they must show that they’ve followed a fair redundancy procedure before deciding to end your employment.
If your employer gets it wrong, it could leave them vulnerable to an employment tribunal claim, and the only way that they can be sure you can’t bring a claim is if you sign a settlement agreement.
This means there is plenty of incentive to agree on a settlement for you and your employer.
Why is a settlement agreement better than resigning?
If you resign from your role, your employment ends when your notice period expires. You should be paid everything you’re entitled to under your employment contract.
You could still claim compensation in an employment tribunal, but this may not be an attractive option compared to a settlement agreement.
Without a settlement agreement, you could miss out on the opportunity to agree:
- a compensation payment
- a payment in lieu of notice
- a reference
- help with finding another job
What to do if your employer offers you a settlement agreement
If your employer offers you a settlement agreement, they should also give you 10 days to consider it. During that time, you should get legal advice. You need to know:
- Is the figure they’re offering you fair?
- Should you negotiate?
- Is there scope for the payments to be made in a tax-efficient way?
Most solicitors will offer you a free initial consultation. This is enough time for you to explain your situation and for the solicitor to advise you on how best to respond.
Armed with that advice, you can then respond to your employer. Often, you can do this directly, or you may prefer your solicitor to respond.
How to ask your employer for a settlement agreement
If your solicitor hasn’t offered you a settlement agreement, you may want to take the initiative and ask for one yourself. The best way to ask your employer for a settlement agreement is to start with a ‘protected conversation‘.
A protected conversation is an ‘off the record’ chat about the possibility of a settlement agreement. It’s an opportunity for both you and your employer to be honest about the employment relationship. Maybe both of you feel that it’s time to go your separate ways.
Let your employer know how much you want in a settlement agreement. Start high (but reasonable). Be prepared to negotiate down. Hopefully, you can reach an agreement that both you and your employer are happy with.
What next?
If you and your employer reach an agreement in principle, then you should expect your employer to provide the necessary document. This may take a few days. They may need to instruct lawyers to draft it.
Once you receive it, you will need to get legal advice. A settlement agreement is only valid once you’ve had advice from a qualified lawyer.
The settlement agreement will include a date for the termination of your employment. Once it has been signed by all parties, your employment will come to an end on the agreed date without the need for a resignation or dismissal.
Need Advice on a Settlement Agreement? Get Free Expert Advice Today!
Are you looking for advice on a settlement agreement? Contact an employment law specialist.
Why Choose Mason Bullock Solicitors?
- Specialised Expertise: We are employment law specialists, providing tailored advice on settlement agreements.
- Proven Success: We have advised hundreds of satisfied clients on resolving their employment issues.
- No-Obligation Consultation: Get a FREE Consultation with a solicitor to discuss your unique situation, including an expert assessment of any proposed settlement.
No Charge to You
In most cases, your employer covers our fees for advice on the settlement agreement, so there’s no cost to you.
Contact an Employment Law Solicitor
For a free no-obligation consultation about a settlement agreement, call 0330 333 6050
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Andrew Crisp is the Principal Solicitor at Mason Bullock Solicitors, where he specialises in employment law and dispute resolution. With over two decades of legal experience, Andrew has built a reputation for his expertise in advising employees on settlement agreements and helping clients navigate complex litigation processes, including the removal of County Court Judgments (CCJs).