Dismissing an employee is rarely a straightforward or easy task. Ending someone’s employment means disrupting their livelihood, something that most people don’t take too lightly. However, there are times when the work is just not getting done, or the employer-employee relationship breaks down to such an extent that it is impossible for employees to continue.
If employment must be terminated, a settlement agreement may be a good way to add structure and certainty to the process. It can also dissuade the employee from potentially seeking legal recourse. A settlement can be less costly and distracting than dealing with a lawsuit, plus it keeps the matter private between the company and the employee, which helps maintain both parties’ reputations.
Before considering whether a settlement agreement is a right way to handle a termination, let’s cover the basics. A settlement agreement is a contract between a company and an employee that outlines the terms of the employee’s dismissal. It also provides protection to both the employee and the company by ensuring that both parties part ways more amicably and with a mutual understanding.
The terms of a settlement can vary, depending on what the company is willing and able to provide and the strength of the employee’s case where he or she to bring the case to court. Not all dismissals are straightforward. If an employee’s case is strong, the company’s legal team should be involved to determine the best course of action.
In addition to the employee’s remaining regular pay, a settlement agreement can also include:
A settlement agreement may be needed in a situation in which the company wishes to avoid a long, drawn-out process before terminating an employee. Depending on the circumstances, the employer may decide to offer an agreement in order to speed up the process. Another reason to use a settlement agreement is if it seems that the trust and confidence between the company and the employee have deteriorated to the point where immediate and decisive action must be taken. Whatever the situation, it’s in everyone’s best interest that termination occurs on mutually-agreeable terms.
Remember that while a settlement agreement helps ease the employee’s transition out of his or her employment, it also serves to protect the company. To accept the benefits and terms outlined in the agreement, the employee should also agree to certain conditions, which may include the following.
Settlement agreements are meant to protect both the company and the employee’s best interests. Avoiding the least desirable outcomes from a termination should always be HR’s goal, and this begins even before the settlement agreement is drafted. It’s important to develop and follow guidelines for the hiring and dismissal of all employees, according to employment laws and company policy. The more informed the HR staff, managers, and all employees are about dismissal procedures, the easier and better the process will be.