07841706203 louise@watersidehr.uk
The situation

You have an issue with an employee such as a breakdown in trust, poor performance or conduct that warrants disciplinary action but you want to avoid going through the processes you would need to follow which are time consuming and stressful for all involved


There is no current dispute, but you want to find a way to come to an agreement with your employee that their employee can terminate without risk to the business of an employment tribunal claim.

What can you do?

You can consider a settlement agreement (these used to be known as Compromise Agreements).

What is a settlement agreement?

A settlement agreement is a legally binding document that an employee’s employment will terminate upon an agreed date and on agreed terms such as a financial incentive and an agreed reference.  The employee must receive independent legal advice on the document for it to be valid.  The company will usually pay for this at a cost in the region of £350+VAT.  The agreement will detail that they will be unable to make any claims.

How do we have a conversation about this with the employee?

You need to have either:

A without prejudice meeting (if there is an existing dispute, investigation or formal process running)

A protected conversation (if there is no dispute)

What does this mean?

These are off the record conversations which prevent anything in that meeting being disclosed as evidence in an employment tribunal.  This is the case for unfair dismissal claims and constructive claims.  Protection is not given for any claims for discrimination, whistleblowing or automatic unfair dismissal (the list of these claims is long but includes a reason connected to pregnancy, whistleblowing, H&S, trade union membership, breach of working time regulations).

There is also an exception in the conversation being protected if it is deemed there has been improper behaviour.  This would be where a tribunal considered behaviour such as bullying or intimidation, putting undue pressure on the employee to accept the offer (e.g., by setting an unreasonably short timescale) or informing an employee they will be dismissed if they do not accept the offer.  In these cases, the discussion would be disclosed.

Do we need to give notice of such a meeting?

There is no requirement for an employer to notify an employee in advance that it wants to have an off the record discussion and there is also no legal entitlement for an employee to be accompanied during these discussions.  However, ACAS do advise it is good practice to allow the employee to be accompanied by a colleague or TU rep so bear this in mind if they request it.

What do we need to say in this meeting?

You would need to ask the individual if they are willing to have an off the record discussion – a without prejudice or protected conversation in accordance with Section 111A of the Employment Rights Act.  Explain that this means that the discussion cannot be referred to in any subsequent employment tribunal proceedings and explain they will not be able to make any legal claims against you for claims and these types of claims would be listed in the agreement but would include breach of contract, unfair dismissal, redundancy pay, breaches of the Equality Act 2010 (discrimination) or unlawful deductions from the wages if they agree and sign it.  Explain that the conversation is confidential and would not have any impact on future disciplinary/performance management processes if the discussions are not successful and these proceed.

Inform them that this discussion is about an alternative to commencing a formal process and to consider a settlement agreement.  This is a mutual agreement to terminate the employee’s employment.  You need to be careful not to imply that the employee will be dismissed if they refuse to participate in the conversation or don’t agree to the settlement.

If they agree to proceed, you should discuss the terms of the settlement, i.e., notice pay, any other pay, agreed reference.  You should then provide them with the proposed settlement agreement and allow them a minimum of 10 calendar days to consider the terms of the offer and to seek independent legal advice on the settlement agreement.  Without this the agreement is not valid as the Solicitor has to sign it off so it has to be done.   Confirm that they should not discuss this with any of their colleagues or the offer may be withdrawn.

Written Correspondance

Ensure any written correspondence relating to the without prejudice discussion/protected conversation is clearly marked ‘covered by section 111A ERA 1996, including any notes of the meeting if they are taken.  If this is not done then that information is not protected.

If they don’t agree

Their employment continues and you will need to consider the formal process you may now need to take or carry on with.