How to end employment by agreement!

7 September 2015
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Employers are frequently faced with the challenge of ending an employment relationship which is no longer viable:

  • Restructuring has resulted in a surplus of staff
  • Serious personality clash which is disrupting the workplace
  • Performance issues that are not suitable for normal disciplinary action

It is possible to negotiate a deal and avoid ending up at an Employment Tribunal. The employer usually instigates a negotiation to try to reach a mutually acceptable solution. If successful the result is a ‘Settlement Agreement’ that sets out the terms agreed between the employer and employee to end the employment relationship.

The key features of a Settlement Agreement are:

Mutual consent – the parties enter the discussion in good faith with the intention to reach agreement, however, they are free to withdraw at any stage up to the final signing off.

Legal Agreement – the intention is to create a legal agreement which waives all rights and obligations relating to the employment relationship, including the option of tribunal hearing, in return for financial compensation.

Financial Compensation – the compensation package must be negotiated and will usually take a range of factors into consideration:

  • Length of services
  • Level of pay and benefits
  • Notice period
  • Contributory conduct
  • Labour market conditions – redundancy settlements, employment prospects

Confidentiality – the agreement will include a confidentiality clause and the negotiations are ‘without prejudice’ basis – there is no admission of guilt or liability and if agreement is not reached the detail of the negotiation is not admissible as evidence in future legal proceedings.


Vincent TurleySeptember 2015

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