Simplifying Settlements- An employers perspective

Simplifying Settlements- An Employers perspective

Employment settlement agreements were introduced earlier this year as part of wide ranging employment law reforms.

Settlement agreements (formally known as compromise agreements) have one main purpose: to settle actual or potential legal claims that an employee may have against his or her employer.

In a bid to drive down Employment Tribunal claims, the Government is attempting to encourage greater use of settlement agreements by producing an Advisory, Conciliation and Arbitration Service (ACAS) template and detailed guidance to accompany it.

Most HR professionals are already familiar with the concept but often directors or managers handle these issues. Whoever is managing the process, it is very often the case that the end stages of any settlement can be fraught with fresh complications and delay. Add to this the cost of lawyers finalising the agreement and the process can be anything but simple.

Can the settlement of disputes or changes to working conditions really be simplified as the Government intends?

Disputes or changes for settlement

Settlement agreements are most often used for employees leaving an organisation. However, they are also used for employees will remain in employment after a dispute or changes to terms and conditions. Examples are grievances for bullying/discrimination or pay cuts across a workforce.

No matter when they are used, the process and the issues tend to be the same. Problems when dealing with settlements agreements. Practically every settlement agreement ever issued will be taken from a template. Indeed, the Government have produced a template themselves.

It seems obvious to say that most cases will be different. Templates are a safe tool to support the process so long as they are then tailored to each set of circumstances. Problems arise because often this tailoring is not done before the settlement agreement is issued to the employee.

In addition, there is a widespread misconception that the independent legal advice process is a ’rubber stamping ‘exercise. Confusion arises particularly when managers and HR have taken great care to ensure that any settlement deal is agreed with the employee internally.

In some cases, settlement agreements are simply rubber stamped but if the employee is not comprehensively advised, misunderstandings and later disputes and issues can and do occur.

In the vast majority of cases, an employee who is comprehensively advised on a settlement agreement is going to want to have the legal contract amended to protect them as per any legal advice that they receive. This creates correspondence, administrative tasks and delay at the very least.

Cases involving a number of employee employees multiply these problems and tasks. In large scale exercises, this can mean entire teams being engaged for months at a time in duplicated logistical and administration tasks.

How to simplify the settlement agreement process and save costs.

A well-managed settlement agreement process will save both time and costs in both individual and multiple cases.

A period of time should always be given for the process to be followed. A few days for the independent advice process alone will normally be required. Following the tips below will always make the process quicker:

1. Management/HR should understand the core protection that any independent lawyer is likely to ask for. References and confidentiality in particular will constantly produce the same requests for amendments or subsequent problems after the agreement has been signed. This is totally unnecessary in the vast majority of settlement agreement cases

2. Management should also understand exactly what promises the employee is being asked to make in the settlement agreement. Look out for clauses relating to no further monies being owed, the return of property, future employment or other matters that are likely to be fundamental to the employee

3. “Whole agreement” clauses often supersede previous agreements or promises that an employer has made sometimes in written correspondence. Look out for these “whole agreement” clauses and understand that they can clearly cause a problem if earlier promises have been made, particularly in relation to monies

4. Management should seek to include all agreed and non-contentious matters into any settlement agreement and check for any obvious conflicting clauses prior to it being issued to the employee(s). Furthermore, where lawyers are being used, they should be fully instructed on all matters and agreements at the outset so that they can tailor the agreement prior to it being issued to the employee(s)

5. Where possible, try to have as many of these conversations with the employee directly before lawyers are engaged on either side

The above has been proven to save both time and costs in individual cases. These efficiencies are multiplied when several employees or more are involved.


The settlement of any actual or potential claim that an employee may have is clearly a better scenario than any actual or potential litigation against an organisation. Therefore, settlement agreements are an extremely useful and common management tool in employee relations. The problems and costs that arise when using this tool can easily be reduced by following a simple process such as the one set out above. If in doubt, seek further professional advice from a lawyer. digg stumbleupon buzzup BlinkList mixx myspace linkedin facebook google yahoo