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Guide to settlement agreements for employers Side Arrow

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Employment relationships do not always run smoothly. In some cases, they may break down to such an extent that it may be necessary to bring the working relationship to an end. But the end of the relationship can mean the start of a claim.

One way of facilitating the end of the relationship without claims being made is through the use of settlement agreements. These are legally binding agreements, entered into voluntarily and agreed through negotiation, which set out the financial and other terms on which an employer and employee will go their separate ways.

Usually, they include a severance payment made by the employer in return for the employee agreeing not to bring certain legal claims. Settlement agreements are a way to avoid costly and time-consuming disputes and Employment Tribunal cases.

The government has also introduced a mechanism whereby employers can initiate ‘pre-termination negotiations’ to discuss an amicable parting of the ways. In that context, offers of settlement cannot be presented as evidence in unfair dismissal cases provided there has been no improper behaviour during discussions about the agreement.

This guide sets out some of the key points involved in settlement agreements but seeking legal advice is essential if you are considering ending an employment relationship in this way.

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