The next step

To accompany settlement agreement

[Letter]

Settlement

[Agreement]

To the Acas Code of Practice on Settlement Agreements

[Weblink]

Making settlement agreement offers

Agreement benefits

Settlement agreements can be used where an employer and an employee are in dispute; where the employee has one or more potential claims against the employer and/or where the parties wish to terminate employment by mutual agreement.

Once the employee has taken independent legal advice on the implications of the proposed settlement agreement (which is a mandatory requirement) and it is signed by all parties, the employee will no longer be able to assert their statutory or contractual rights.

Money on offer

In return for entering into a settlement agreement, the employer will pay the employee a settlement sum. This will often be based on the reason behind the termination of employment and whether the employee has any valid claims against the employer.

Now let’s suppose that you’re about to put a formal settlement offer to an employee. How long should that offer remain open for?

Acas Code of Practice

Acas has a Code of Practice on Settlement Agreements (see The next step ). At paragraph 12 it says that the “Parties should be given a reasonable period of time to consider the proposed settlement agreement. What constitutes a reasonable period of time will depend on the circumstances of the case” .

It then goes on to say that: “As a general rule, a minimum period of ten calendar days should be allowed to consider the proposed formal written terms of a settlement agreement and to receive independent advice, unless the parties agree otherwise” .

Tip. This doesn’t mean that the employee can sit on the offer for ten calendar days and then seek independent legal advice. They must do the two concurrently.

This is on offer until...

When making a formal settlement offer, it’s vital that you expressly state when it will be open until, i.e. “This offer will remain open until....(insert date) . Don’t give a verbal deadline.

The reason for this is that your offer could be considered permanently on the table if there is no specific expiry date.

Risk. In the event the settlement negations break down and you end up in the tribunal, the judge may conclude that you have to pay that amount anyway, plus swallow the costs of a potentially expensive tribunal hearing.

Tip. Make your deadline for acceptance absolutely clear in your letter to accompany settlement agreement (see The next step ). If that deadline passes, and you still wish to settle on those terms you can renew it - don’t forget to set a new deadline. Alternatively, you could amend the settlement terms you are offering. If you are unsure, always seek legal advice.

For the Acas Code of Practice on Settlement Agreements, a letter to accompany settlement agreement and a settlement agreement, visit http://tipsandadvice-personnel.co.uk/download (PS 22.13.04).