It's All About People - 22nd May 2025

READ TIME - 3 minute read

Sometimes, the best way forward is a well-handled goodbye.

Settlement agreements can be a powerful tool to resolve workplace disputes — but only when done properly. This week, we’re unpacking what they are, when to use them, and how to avoid the traps that catch many businesses out.

✔️ Understanding the basics
Settlement agreements are legally binding contracts used to resolve disputes between an employer and an employee — typically when someone is leaving the business. They offer closure, protection, and a clean break… if they’re handled well. But they must follow a strict legal process — including the employee getting independent legal advice — or they won’t hold up.

✔️ When might you use one?
They’re often used where there’s been a breakdown in the working relationship, but there’s no desire to go through a lengthy grievance or disciplinary process. Maybe there’s a clash of personalities, a loss of trust, or an underperformance issue that’s unlikely to improve. Sometimes, they’re used during redundancies — especially where there might be disagreement over selection or process. And occasionally, they're simply the most respectful way to part company when it’s clear the fit isn’t right anymore.

Using a settlement agreement doesn’t mean you’ve done something wrong — quite the opposite. It can be the best way to reduce stress, maintain dignity on both sides, and avoid future claims.

✔️ What does a settlement agreement include?
Typically: the reason for leaving, any financial payments (like notice pay and often compensation), a confidentiality clause, and a waiver of the employee’s right to bring future claims. It can also cover things like agreed references or returning company property — all tailored to the situation.

✔️ How to get it right
A fair and effective agreement doesn’t just protect you legally — it reflects your values as an employer. It’s about clarity, dignity, and finding balance between business protection and employee wellbeing.

📚 Want to learn more?
We’re running a Lunch and Learn session all about settlement agreements — what to include, how to handle them, and real-life examples of what can go wrong (and how to avoid it). It’s usually £35+VAT to attend (free for clients), but as a gift from us, you can join for free using code IAAP when booking.

Until next week…

Best wishes,
Emma

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Events to Join in the coming weeks

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