Where settlement agreements would historically come up maybe a couple of times per year, we have recently handled several in just a few weeks. Since the lifting of Covid restrictions and employees returning to the workplace, we’ve noticed a steady rise in the number of clients enquiring about them.

There has been a widely reported shift in working attitudes since Covid, with many employees fighting to remain working from home, often against their employers wishes; and others re-evaluating their work-life balance altogether. With some individual’s workplace issues lying dormant during their time working from home, the return to the workplace has re-activated certain feelings and behaviours creating conflict and tension for which both employer and employee are looking for a quick fix.

Designed to be a quick fix arrangement between an employer and an employee to settle a workplace dispute, one of the main points of a settlement agreement is that the employee will forgo the option to make a tribunal claim regarding the incident that has given rise to the settlement being made. Usually, this surrender of rights is made in return for a financial settlement and the promise that the matter is finally put to bed.

Whilst a settlement agreement can be a good way to circumvent what might otherwise be a drawn out disciplinary or performance management process, we don’t recommend that they should be seen as an alternative to either and should only be considered under certain circumstances. They are not a substitute for good working practices; nor are they the default position for when management fails.

Consider that a monetary settlement will be involved that the employer must be prepared to negotiate and pay, and that coming to one settlement may open the floodgates of other employees expecting the same. There is also the danger that an employer will get a reputation for simply ‘paying off’ problematic employees.

A 'without prejudice' conversation relating to a settlement agreement can be started at any time by either an employer or an employee, but it must be done properly so as not to influence or prejudice any future events or decisions. Discussions should include payment arrangements, how the employment will be terminated (if this is an outcome) and any terms of an employer reference.

Once an agreement has been reached it must be put in writing and the employee given adequate time to consider it; usually ten days. The employee should also be advised to seek independent legal advice to have the terms of the settlement clearly and unambiguously explained to them. The cost of this advice should be met by the employer.

Once concluded, the employee has effectively given up any option to claim for unfair dismissal, provided this is detailed in the settlement agreement, so make sure that all loose ends are tied up. Also remember that some dismissals are automatically classed as unfair if they relate to an employee exercising specific rights relating to pregnancy or whistleblowing for example so don’t try to use a settlement agreement in those cases.

Although settlement agreements usually conclude an individual’s employment within a company, they don’t have to. A settlement agreement could be used to settle a dispute over an employee’s holiday perhaps, or an in-work benefit.

As mentioned, settlement agreements should only really be considered as a last resort, but if you do need advice about implementing one you can call us on 01452 331331 or via e-mail on This email address is being protected from spambots. You need JavaScript enabled to view it.