Settlement Agreements (formally known as Compromise Agreements) are commonly used as a means of resolving disputes between an employer and employee and terminating the employment relationship.
Under a Settlement Agreement, the employee receives a financial payment in exchange for agreeing that they will not pursue an employment related claim against the employer. This type of Agreement can effectively protect the employer but there are legal requirements for the Agreement to be binding on the employee.
If the employee does not receive independent legal advice in relation to the terms of the Agreement then a claim can be pursued in the Employment Tribunal. For that reason, we recommend that you obtain legal advice before agreeing severance terms with an employee.