How to approach a settlement discussion with an employee

Oct 28, 2019 | Termination

Once you’ve decided that you are going to have a discussion with an employee about the possibility of ending their employment with a settlement agreement, you may not quite know how to actually start the process.
Here are some practical tips to make sure you achieve what you need while protecting yourself.

Take advice

Before entering into discussions, make sure you have taken some professional advice, from an HR consultant or a solicitor, so that you are very clear on whether the discussion is sensible, the possible outcomes and liabilities, and how much a settlement is likely to cost you.

Explore first 

Ask the employee if, in the context of whatever ongoing formal process is in place, they’d be open to discussing alternatives.
If they are open to the idea, don’t leap in with a proposal or a pre-written agreement, arrange a meeting separately.

At the meeting

You don’t have to allow the employee to bring a colleague with them, or a union official if they are a member of a union, but it would usually be sensible to do so. Also ensure you are accompanied, by another manager or by an HR professional. You will then have a witness should you need one.
Make sure your intention that the conversation is a protected one is clear, by stating that the meeting is a protected conversation under section 111A of the Employment Rights Act, and is also being conducted on a Without Prejudice basis. It may be that one or other of these may not technically actually apply, but by making these statements you are at ensuring it is clear that you are talking on the basis that the conversation won’t be part of any future legal proceedings.
Explain to the employee that you are proposing to offer them a settlement with a view to ending their employment amicably. Tell them any financial settlement you are proposing and also explain any other elements of the offer which are relevant, such as a reference, or no requirement for them to work out their notice.
Make sure the employee is clear that the proposal is entirely optional and they are under no pressure to accept, whilst also outlining what happens if they choose not to accept (i.e. that the formal process you are currently undergoing will continue). Don’t pressure them, threaten them or do anything else which may constitute improper conduct.
Offer them the opportunity to go home and take some paid leave while they consider and take advice on your offer. Do not compel them to do so unless you feel the business is significantly at risk if they remain at work.
Ensure they are given a reasonable period of time to consider the offer, usually 10 days, and that they are notified that you will pay reasonable legal fees for them to seek advice on the terms of the settlement.

After the meeting

Follow the discussion up in writing marked “Without Prejudice and subject to S111A Employment Rights Act 1996′, either with a draft settlement agreement, or stating that if they want to proceed, a draft agreement will be issued to them. Ensure the agreement is drafted by either a solicitor or an HR consultant experienced in doing so, in order that it meets the necessary legal requirements to protect your business.
Even if they are staying off work, unless you feel the business would be significantly harmed, don’t do anything which might look like pre-empting that their employment will end, like removing email access or similar.
If the deadline expires and the employee hasn’t responded, instruct them to return to work, and carry on with whatever formal process you have “paused’.
If you’d like some advice on how to conduct a settlement discussion safely do get in touch.