Are Settlement Agreements Really Worth It?

In his latest blog, Clive Mackintosh, an experienced settlement agreement solicitor explores the benefits and risks associated with settlement agreements, a formal way to end an employment relationship.

Settlement agreements offer a package of benefits in exchange for an employee agreeing not to pursue legal action against their employer. A solicitor will be able to advise an employee on whether the terms of a settlement agreement are in their best interest.

In advising an employee on the suitability of a settlement agreement, the solicitor will consider the relevant issues and facts involved in the employee’s relationship with their employer. This is essential when assessing the benefits and risks an employee may face when agreeing to enter into a settlement agreement.

Settlement agreement benefits:

• Certainty: A settlement agreement provides a definitive end to the employment relationship, avoiding the uncertainty and stress of potential litigation.
• Financial Benefits: Settlement agreements often include the incentive of a lump sum payment, which can be a significant financial boost for an employee. They also cover the resolution of outstanding holiday pay, bonuses, and other employee contractual benefits.
• Confidentiality: Settlement agreements typically contain confidentiality clauses, protecting the employee from public disclosure of the reasons for the termination of their employment.
• Avoiding Litigation Costs: Taking an employer to an Employment Tribunal or Court can be expensive and time-consuming. A settlement agreement avoids these costs for the employee and achieves a swift resolution to their dispute.

Settlement agreement risks:

• Potential Loss of Rights: By signing a settlement agreement, an employee may be asked to waive certain legal rights, such as the right to claim unfair dismissal or discrimination.
• Tax Implications: The tax implications of a settlement agreement can be complex if the financial payments to be made are large and involve payments to an employee that exceed their contractual benefits or include elements of a payment that are offered as an incentive to force an employee into agreeing the termination of their employment.
• Pressure to Settle: Employers may sometimes pressure employees to accept a settlement agreement quickly, which can leave little time for proper consideration and independent thinking.
• Ethical Concerns: An employee may feel pressured to sign a settlement agreement even if they believe they have a strong legal case.

Settlement agreements can be a valuable tool for resolving employment disputes, but they are not always the best option for every employee. An employee should obtain independent legal advice to make an informed decision on whether the settlement agreement, is indeed, in their best interests.

For advice on concluding your settlement agreement contact Clive Mackintosh today, call 0330 043 8845, email clive@solicitor.help, or request a call back.