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When should you use settlement agreements?

A settlement agreement is a signed agreement that the employee will not pursue any sort of claim against the employers. These claims can include:

–       Unfair dismissal

–       Discrimination

–       Unlawful deduction of wages

–       Breach of contractsettlement agreements 1

Settlement agreements are best used when you want to bring a working relationship to an amicable and clean end. Situations when settlement agreements are best suited are when both the employee and employer feel that the employment should come to an end. Settlement agreements are a good way to end workplace disputes whilst avoiding a claim or an employment tribunal.


Settlement agreements can be offered at any stage of a working relationship although the employer may want to consider alternatives first. They do not solve every problem and employers should remember that good management is an effective tool for solving workplace disputes. Talking with the employee and finding the root cause of the problem is the first step that an employer should take.

Before the use of a settlement agreement, you must discuss this option with the employee. A settlement agreement out of blue may cause offence to an employee who did not know that there was an issue within the workplace. Remember a conversation about a settlement agreement is without prejudice and perfectly legal.

When you feel that a settlement agreement is the only option, there are a couple of things that must be in place before you can start the process;

–       The agreement must be put to the employee in writing

–       The employee has 14 days to consider the agreement

–       The employee must have sought legal advice

Remember to always consult a HR professional before starting this process. Our chartered HR consultants are always on hand to give you advice. Call us today on 0141 328 2600 or email us on

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