Most employers have signed a settlement agreement with an employee over the past year, but only a small minority use them routinely, an XpertHR survey has found.
The survey, based on responses from 471 employers comprising more than one million staff, found that more than four-fifths (83%) of employers had signed one or more settlement agreements over the past 12 months.
Settlement agreements resources
However only one in eight (13%) employers said that they “routinely” use them to facilitate employee departures.
Asked how many were signed over the past year, the median number was three.
Settlement agreements were known as compromise agreements before they were renamed in July 2013, alongside a reformed legal framework that extended the employer’s ability to have protected conversations about departures.
The XpertHR survey also revealed that it is not unusual for employees to initiate an agreement themselves.
Almost one-third of employers reported that an employee has proposed a settlement agreement over the past 12 months, rising to more than half (51%) at large organisations.
While most employers were positive about the new legal framework, most have not noticed any difference.
Fifty-eight percent said that it has had no impact at their organisation, although a further 40% thought that the changes had had a positive impact in helping them to have difficult conversations with employees about departures.
Other findings include:
- The most common reason for signing a settlement agreement is a relationship breakdown or professional disagreement between employer and employee, cited by 70% of respondents.
- Most employers said that their agreements usually have a confidentiality clause (93%), an agreed reference (87%), a financial settlement (70%) and an agreement not to make derogatory statements (68%).
- Just over a quarter (27%) of employers think that the introduction of tribunal fees has reduced the need to sign settlement agreements, although half (49%) do not believe that this is the case.