It’s quite unusual for an employee to approach you with the offer of leaving under a settlement agreement, so best to talk to us if you ever find yourself in this situation!  

However, if you’re worried about any sort of legal dispute with a departing employee, you’ll want to know about settlement agreements.  A settlement agreement, sometimes called a compromise agreement, is a document that lays out the terms of an employee’s departure. 

It will include the agreed amount of severance pay, in exchange for certain requirements on their part – for example waiving their right to bring a future legal claim against your business. 

These agreements are often used when both parties want to avoid the stress and expense of filing or replying to an employment tribunal claim. If a claim has already been filed, a settlement agreement can be used to avoid getting to a costly Employment Tribunal hearing. 

Many employers will use a settlement agreement as a standard approach to avoiding or settling disputes in the workplace. Examples of when a settlement agreement may be used: 

• If an employee is subject to disciplinary action 
• If there is a performance issue 
• If you have made a serious recruitment mistake and want to exit an employee quickly 

Essentially, a settlement agreement brings an employee’s contract of employment to an end on mutually agreeable terms. 

Next time you have a problem with an employee, speak to us, as expert HR consultants, we will talk you through all of the options available to you, which may include using a Settlement Agreement.