A settlement agreement, sometimes referred to as a compromise agreement, is a legally binding contract between an employee and an employer. It is voluntary and aims to resolve disputes by allowing all parties to come to a mutual agreement on the situation at hand.
If an employee makes a claim against their employer, they will often take this claim to the industrial tribunal. However, if they sign a settlement agreement, it removes their rights to take a claim to a tribunal.
Instead, there may be some negotiation between all parties and they settle on a set of conditions or compensation that satisfies both the needs and wishes of everyone involved.
Many of these negotiations require a third-party individual called a mediator. A mediator communicates with both parties and ensures that the terms of the agreement of fair.
Let’s run through some of the financial and non-financial payments that can be included in a settlement agreement, as well as some of the main benefits of settlement agreements.
Aspects of Settlement Agreements
If you have recently made a claim against your employer, they may have asked you to come to a settlement instead of taking your case further.
Firstly, it’s important to know that you don’t have to accept the settlement. If you wish to continue working with a lawyer to file a claim against your employer, you have every right to do so.
If you decide to go down the settlement agreement route, it’s essential that you understand some of the financial and non-financial aspects of a settlement agreement.
You can use a Settlement Calculator to estimate the financial compensation that you deserve. This will help you when negotiating the conditions of your agreement.
Potential financial payments include:
- Contractual payments until termination of employment
- Termination payments
- Payment of bonuses or shares
Non-financial terms may include changes in your work contract terms, confidentiality clauses, and the maintenance of company shares, bonuses, or private health insurance.
What Are the Benefits of Settlement Agreements?
There are several benefits of settlement agreements. Here are some of the main benefits.
- You can maintain a positive relationship with your employer and leave your employment on good terms
- You may secure financial compensation for poor treatment in the workplace
- You can avoid going through the process of making a claim with the Industrial Tribunal and gain compensation more quickly
- Your negotiated payment may be higher than the statutory minimum amount
- It provides a less stressful method of terminating your employment and maintaining your personal finances
Finalizing a Settlement Agreement
Only once a settlement agreement has been approved by the court and signed by both you and your employer will it be enforced. Prior to both parties signing the agreement, the courts are unable to enforce the conditions of the agreement.
It’s important to note that the court can’t make any changes or adjustments to the settlement agreement. They can only enforce the conditions that have already been set by you and your employer.