A settlement agreement is where an employee agrees to waive their right to bring legal action against their employer, usually in exchange for a settlement payment. When it comes to the question, “Settlement Agreement How Much”, what is the answer? That is what we will set out to answer for you and we think you might be quite happy with the answer.
A settlement agreement is often used in a redundancy arrangement or in any situation where an employer wants you to leave but is prepared to pay you some compensation in lie of your future earnings.
You might have been offered a settlement agreement, or you may be an employer considering your options ahead of a redundancy situation…
The benefit to each party of a settlement agreement, is that it brings closure for both the employer and the employee.
You both know precisely how much you will either pay or be paid, depending whether you are the employer or employee.
Once an employee agrees on the terms of their exit, the employee will no longer be able to bring a case to an employment tribunal.
When it comes to the question we are answering, “Settlement Agreement How Much”, there are two ways to look at this, in terms of the cost to the employee for obtaining a settlement agreement, and the amount of compensation they will receive.
We shall look at both.
Settlement Agreement – How Much Will It Cost The Employee To Obtain A Settlement Agreement?
The good news if you are an employee is that it will not usually cost you a penny. Your employer usually agrees to pay the full amount of the legal fees to obtain a settlement agreement, both in terms of their own fees in having the agreement drafted, and your solicitors fees for advising you on the terms of your settlement agreement.
Settlement Agreement – How Much Will You Receive?
One of the reasons you will need a settlement agreement is in a redundancy situation.
What Is Redundancy?
Redundancy is where the needs of the employer for a work of a specific type has reduced to the point where they don’t need as many staff as they previously did.
However, it can also mean the employer is closing a workplace, and the staff who work there will be asked to relocate. If they’re not able to do so, whatever that reason may be – then they could be made redundant.
The key here is that any employer that finds themselves in a redundancy situation MUST go through a fair redundancy procedure before making any decisions on redundancy.
That could include applying fair selection criteria, consulting with employees, explaining the reasons, exploring whether there might be alternative options, and allowing employees to appeal against their redundancy.
The reality is this can be a difficult situation for employers to manage. It’s time-consuming, involves A LOT of administration, and it’s not conducive to good morale.
Hence why many employers will offer a settlement agreement as an alternative to going through the process of redundancy…
What Is A Reasonable Settlement Agreement?
A settlement agreement will always end up being somewhere in the middle of what the employer wants and what the employee wants, as they ‘settle’ on a number.
A settlement agreement is good for employers because it protects the business AND it ends things once and for all, while still giving the employee some compensation for their loss of employment.
It’s not just financial payments that can be agreed upon as part of a settlement arrangement.
There are also non-financial benefits such as gardening leave and confidentially clauses and also possibly removal of restriction of working for competitors or poaching clients etc. They can also include employees may keep life insurance, health insurance, and even company cars, phones, and computers.
With that said, if an employee has been dismissed or forced to resign, has been employed for at least 2 years, and has evidence of unfair dismissal, then you should expect to pay between 1-4 month’s salary plus notice pay.
If they have evidence of whistleblowing or discrimination, then that figure could rise to 6 months or more.
This is only a rough guide, though, and any figures will be determined by the individual case, circumstances, and people involved.
This is why it is so important that you obtain legal advice before signing off on your settlement agreement.
Your solicitor will quickly be able to tell you if you are receiving a fair offer of compensation.
Can An Employee Offer A Settlement Agreement Instead Of Redundancy?
One of the most important factors in a settlement agreement is that the employee waives the right to progress through a fair redundancy procedure in exchange for a settlement fee.
This means it’s worth considering in any redundancy situation where you think there might be an issue.
There are positives for both the employee and employer, given that the employee will receive a financial settlement, both parties can move on, and the employer avoids any legal action further down the line.
However, an employee DOES NOT have to accept the settlement agreement – if they refuse, the employer still has the option to press ahead with the redundancy process.
If this is the case, it might be wise to seek legal advice to ensure that the procedure has been conducted fairly or whether there might be the potential for an unfair or wrongful dismissal claim.
Can An Employee Request A Settlement Agreement?
Yes! An employee CAN request a settlement agreement in a non redundancy position.
If you’re looking for a quick agreement instead of a long wait for an employment tribunal decision, then it might be a good thing for both parties.
But it is a negotiation, and it’s important that you’re happy with the settlement you come to – both the employee and employer will start with certain goals in mind, and it’s a negotiation to get to an agreement.
Nobody really wants to go to a tribunal – it’s the last resort for employees and employers. Even if you think you could win, it might be a smarter decision to agree to settle.
Settlement Agreement Solicitors Near Me
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