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Posted by on in Compromise Agreements
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The Benefits of a Settlement Agreement

Many people naturally associate settlement agreements with negative connotations with such documents often offered following the dismissal or resolving matters such as discrimination, unfair dismissal or even unpaid wages.

While there are many rules to follow with settlement agreements (such as they must be in writing) such agreements can be beneficial not only to an employer but also to an employee.

What is a Settlement Agreement?

A settlement agreement is a document which is legally binding and outlines the issue or reason for the document as well as the full terms of a settlement between both parties. The documents tend to be used during redundancy talks; however they can be used to resolve any workplace issues and the document must be signed by both parties. Formerly known as compromise agreements, a settlement aims to find a middle ground, often involving a significant, tax-free settlement. In exchange for this sum, any legal action that could have occurred ceases.

As well as offering a cash settlement, such agreements can include details of how the claim will be settled and any additional aspects of the agreement e.g. the inclusion of a good reference.

Why do Employers Off Settlement Agreements?

Settlement agreements are offered by employers as they can be exceptionally beneficial. Rather than a costly legal battle which can damage the reputation of a company, a business can end any legal action by offering a settlement, often saving time and money in the long run by quashing the proceedings in a fair way. The agreements also offer a clean break rather than a notice having to be served or the threat of legal action hanging over the company.

As well as ensuring that former employees cannot speak out about their time in the workplace, settlement agreements can also include a period where employees cannot work in the same sector. This can be exceptionally useful for companies operating in niche areas, ensuring that their industry tactics are not lost to competitors.

Are Settlement Agreements Beneficial to Employees?

Although there are many negative connotations to a settlement agreement, they can be just as beneficial to an employee and they are to an employer. It is important to note that settlement agreements do not need to be signed by an employee. They can be offered and negotiated on with an employee not having to sign such a document. Negotiations can include attempting to get a larger cash settlement, the inclusion of a good reference or other guarantees.

One of the main benefits of a settlement agreement is that they tend to offer a substantial amount of tax-free capital. The lump sum can be paid in many different ways and if other factors such as a gagging order are in place, the settlement agreement can reflect this.

Settlement Agreements: What must I use a Solicitor?

When negotiating a compromise agreement, it is vital to remember that once the document is signed, it cannot be changed. Therefore, it is vital that the amount you are awarded is fair and just and that you are not undersold what you are rightfully owed.

A solicitor will also be able to use their wealth of experience and knowledge to give a rough estimate of what your claim could be worth, as well as supporting you throughout all stages of your settlement agreement.

Contact Us

We recommend that if you are offered a settlement agreement, you do not sign or attend a meeting about the document without a solicitor. At Employment Law Edinburgh, our team of expert employment lawyers can give you tailored and advice throughout your settlement claim. To find out how we can help, contact our team of expert solicitors today using our online contact form.


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