Should I Accept a Settlement Agreement?

Sometimes in the world of work, grievances and disagreements can arise, which can often lead to employees and employers wanting to, or having to, make an agreement with one another to resolve the conflict. 

In many cases, settlement agreements may be the best course of action for both employees and their employers to reach a mutually beneficial agreement to end employment. 

If you have been offered a settlement agreement from your employer and you are wondering whether or not to accept, we have put together the below blog to outline the important information you need to know to help you make a guided and informed decision.  

If you are unsure as to what a settlement or compromise agreement is, you can find out more here . 

Why would an employer offer a settlement agreement? 

In most cases, an employer will offer a settlement agreement if they wish to terminate an individual's employment on terms that are mutually agreed upon with the employee where the employer is wanting to protect their position. 

This is done to ensure the termination is as seamless as possible for both employer and employee, reducing the chances of the situation going to Court or employment tribunal, which can be a stressful, costly, and time-consuming process for both parties.  

Settlement agreements can also be offered as an alternative to performance reviews or even redundancy, negating the need for internal processes to be completed where an exit package can be agreed upon. 

What are the advantages of accepting a settlement agreement? 

Accepting a settlement agreement can come with many benefits for employees. 

Of course, the biggest benefit of settlement agreements for employees is receiving a sum of money to assist with their transition out of the business, which is often more than what they would be entitled to statutorily if dismissed for performance or redundancy for example. 

Additionally, a settlement agreement acts as a peace offering between employer and employee, providing an amicable break between both parties. 

Furthermore, as part of the settlement agreement, employees can negotiate a good reference from their previous employer so as to help them on their path to finding new employment.  

Settlement agreement negotiations and settlement agreement counteroffers 

Should you be offered a settlement agreement by your employer, you have the right to begin negotiations. 

Typically, a settlement agreement solicitor will take care of the negotiation for you, however, you can certainly dictate to your solicitor what you would like to see present in your settlement agreement, such as a different sum or a strong reference.  

When making a settlement agreement counteroffer, it’s important to be realistic in what you’re counter offering with. For example, if you counteroffer with a new sum that is drastically larger than what you were originally offered, your employer may withdraw the settlement agreement.  

The settlement agreement can be withdrawn at any time until it is signed by both parties.  

What happens if I reject a settlement offer? 

If you decide to reject a settlement agreement offer, you should consider what you want to do as your next steps. 

For example, if there has been a conflict in the workplace and a settlement was offered to resolve this, rejecting the offer may mean the issue must go to an employment tribunal to be resolved. 

Before making any decisions regarding your settlement agreement, you should carefully consult with your dedicated employment law solicitor to ensure you’re choosing the best possible course of action for yourself and your future.  

Accepting a job after signing a settlement agreement 

Accepting a settlement agreement should not have any impact on you getting a new job in the future – it is not something that you have to declare in an interview. 

If your settlement has a specific clause that states you cannot discuss the nature of your settlement agreement or the reason why you left our previous job, then you must ensure you do not disclose any information as this may be a breach of the agreement.  

Sometimes, an employee can accept to continue their job with their current employer despite having a settlement agreement with them. The terms of the employment should be clearly outlined both in the settlement agreement and in the new employment contract.  

Should I accept a settlement agreement? Speak to settlement agreement solicitors to find out your best course of action 

Smith Partnership has a team of employment settlement agreement solicitors that can assist individuals with their settlement agreements. 

If you have been offered a settlement agreement from your employer and you’re unsure of the terms of the settlement agreement, your rights or the amount you have been offered, get in touch with our employment law solicitors today at 08000 32 32 02 or send us an email via sa@smithpartnership.co.uk to discuss in further detail.