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Settlement Agreements - New term for Compromise Agreements

Posted by on in Compromise Agreements
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As of 29th July 2013 settlement agreements will be used by employers who are looking to terminate the employment law relationship with one of their employees. Settlement agreements replace compromise agreements which have been used for years  in such situations. The Government has made this change after consultation as it wishes to allow employers to have greater ability to engage in confidential discussions with employees about terminating their employment. Such discussions are confidential in so far as they cannot be referred to by the employee in a subsequent claim for ordinary unfair dismissal 
( ie the employee doesn't accept the settlement offer and then resigns over the fact that the offer was made to them and then claims constructive dismissal).

Settlement agreements require to be in writing and the employee must receive independent advice from a suitably qualified person as to the terms of the agreement and the legal consequences of agreeing to it. The employee must not exert any pressure on the employee to accept the offer. If accepted the employee will receive financial compensation for loss of their employment and employment rights. This is normally paid in a "lump sum" and on a tax free basis up to £30,000.

It is the standard practice that the employer pays for the legal advice that the employee requires to obtain to make the agreement legally binding. Our employment law solicitors have significant experience in advising on the terms of such agreements . Contact us to find out if you are being made a good offer to end your employment. It may well be that we can negotiate on your behalf to increase the lump sum offered depending on the circumstances.

Contact us today or complete our online enquiry form.

THis article does not constitute legal advice and is for information purposes only.


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