Settlement Agreement Pros & Cons

Settlement Agreement Lawyers Glasgow 

Benefits to the Employee of a Settlement Agreement:

Speed: It means you are paid a financial settlement sooner, normally within 28 days.

Hassle-free: Avoids the stresses and strains of litigation through the Employment Tribunal, who require to hear evidence before they can make a financial award.

Certainty: A claim at the Tribunal also involves a risk of the claim being dismissed, with no award being made at all, whereas Settlement Agreements are legally-enforceable contracts.

Tax benefits: An agreed lump sum for payment of compensation for loss of employment can be paid tax free up to £30,000, whereas continuing in employment means salary being taxed in the usual way.

Reference: Employer will often agree to give a reference containing information about duties and skills, whereas the Employment Tribunal has no power to order this.

Drawbacks to Employee?

Unanswered questions: The case is ‘settled’ which means that you give up the right to pursue it further in the Employment Tribunal or Sheriff Court. Unless a crime has been committed, no further action will be taken.

Confidentiality: You will be asked to sign a ‘gagging clause’ and agreeing not to discuss it with anyone else outwith your partner and your lawyer. If you do so later, you will have to repay the money and also your employer’s legal fees.

Wider benefit: In certain cases the Employment Tribunal can make a recommendation that an employer acts differently in future towards other employees. Under a Settlement Agreement there is no equivalent power.

Benefits to Employer of a Settlement Agreement:

Certainty: Being taken to the Employment Tribunal can be unpredictable, but the one thing you can bank on is that it will not be quick. The average case takes nine months to a year, and complex cases (e.g. discrimination) much longer. The outcome can then be appealed.

Peace of mind: Even if an employer has a very strong case on paper, there are limited ways in which a claim to the ET can be blocked or thrown out, and many hearings will be required before that stage can be reached. 

Cost: Although the employer has to meet the cost of the employee getting legal advice on a settlement agreement, this would be outweighed many times over by the cost of defending an ET claim, even if it is successfully defended.

Confidentiality: There may be matters which your company does not want to be aired in public, especially since Employment Tribunal judgements are now published online.

Drawbacks to an Employer?

Unearned income: Any successful company has many hard-working employees – why should someone causing problems to the company be paid more than they are?

Internal reasons: Confidentiality clauses can be difficult to police, and workplace gossip may also cause disruption if there are divided loyalties and a lack of transparency.

Ethical leadership: If claims being made are baseless, then the company may wish to discourage others from following a similar path by offering a financial settlement which could be perceived as ‘hush money.’

Contact our Employment Lawyers in Glasgow today 

At Livingstone Brown our employment lawyers are experts in approaching employers and negotiating exit packages for our clients.

Contact our employment law team today and one of our solicitors will be happy to help. Call us on 0141 429 8166 or complete our online contact form.