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To write it down! Choosing the right type of document is key. Here are our thoughts to help you get it right.

Settlement agreement

The employee settles any employment law claim listed in the agreement (whether contractual or statutory – save for a handful of exceptions). To be legally binding, the employee must take independent advice from a lawyer (which can lengthen negotiations) on the terms and effect of the agreement. You’ll need to contribute towards the employee’s legal fees.

Contractual termination letter

Use with caution! The letter confirms that in return for a payment, the employee waives any contractual claims against you. But, this letter doesn’t (and can’t) prevent the exiting employee from bringing a statutory claim against you so be sure to take advice before suggesting this type of agreement. This letter is great for low-risk scenarios or scenarios where you’re not offering the exiting employee much of an incentive financially (or otherwise) to exit.

COT3 agreement

A great option if ACAS early conciliation has been triggered (if it hasn’t then you don’t have the opportunity to use this agreement). These agreements are usually fairly brief (typically two pages) making them ideal for more straightforward situations. There’s no requirement for the exiting employee to take legal advice on the terms of the agreement (although ACAS’ involvement often proves a reassurance).

However, ACAS may not be willing to support this type of agreement if you’ve asked for ACAS’ support at a very late stage. Equally, ACAS may resist anything more than their ‘standard terms’ for this type of agreement.

Our Intelligent Employment platform includes our up-to-date COT3 agreement template – for more information on accessing our documents, get in touch.

Drafted well, the confidentiality clause is lawful and reasonable. But to achieve a workable agreement the wording needs to take into account the following:

Protected disclosures

Make clear that nothing in the confidentiality clause prevents the exiting employee from ‘blowing the whistle’. If it looks like you’re attempting to stop them from blowing the whistle the clause and possibly the entire agreement will be unenforceable.

Likewise, don’t expect to be able to prevent the exiting employee from working with authorities, including the police, about the matters covered by the agreement (even about any already known claims, grievances or issues).

Carve out exceptions

Make it clear that the exiting employee isn’t prevented from discussing or raising specific issues with you. Although there’s no legal requirement to do this, including wording along these lines helps with the enforceability of the wording.

Protecting well-being

Call out that exiting employees can speak about the terms of their agreements with professionals including medical, therapeutic, counselling, legal or financial support services.

But supporting exiting employees and ensuring settlement agreements encourage individuals to have the confidence to flourish (and even return one day) once they’ve left your employment doesn’t stop there. Here are our thoughts on settlement terms that often cost little but can achieve a lot.

Continuing employee benefits

If you’ve already paid the annual premium for benefits (such as private medical or life assurance), allowing access to those benefits for an agreed period after the employee has left (subject to insurer approval) allows the employee to feel protected until they secure their next role (possibly with similar benefits).

Outplacement and coaching support 

It may be years since the exiting employee dusted off their CV or attended an interview. This support gives confidence to those concerned about putting themselves ‘out there’ and searching for a new job. Even for those happy to start the search, outplacement and coaching can help to polish off their CV and interview skills.

Financially, you can set a capped contribution for the support (so it won’t break the bank) which can be offered tax efficiently. Our Empowering People Group can provide this support – click here to learn more.

References and announcements

Agreeing on a factual reference and internal/external announcements means you can work with the exiting employee controlling the messaging around their exit and supporting them with their hunt for their next role.

Fast payment 

Promising speedy financial settlement payments means the exiting employee feels they’re in touching distance of the financial support, costing you nothing but helping the employee to manage outgoings.

‘Without prejudice’ and ‘protected conversations’ can be used to protect exit negotiations but are often confused leaving you unknowingly exposed. Both have their uses! Here’s what you need to know:

Protected conversations

A better label would be ‘partially protected conversations’ as they allow you to discuss an employee’s exit with them without exposing you to claims for unfair dismissal. But, all other claims are fair game!

Be aware though – even the protection in respect of unfair dismissal falls away if there’s the suggestion you’ve behaved improperly and put the employee under undue pressure. So, there’s a place for them provided there’s no risk of claims beyond unfair dismissal.

Without prejudice

There has to be a dispute in play for this protection to work (so think grievance, informal allegations etc). Assuming there’s a dispute, ‘without prejudice’ conversations protect against all claims, including discrimination and whistleblowing.

The protection falls away if there is ‘unambiguous impropriety’ on your behalf so it’s not a magic answer to everything.

Take early advice 

Always speak with your employment lawyer before entering into settlement discussions – if early discussions aren’t protected effectively they’re hard to unpick. We’re here to help.