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The impact of settlement agreements

Settlement agreements replaced compromise agreements in July 2013, adding the benefit of confidential discussions when the parties were negotiating the end of an employment relationship in a mutually acceptable way.

So, has the change had an impact?

The agreements are as popular as ever, with 83 per cent of employers signing one or more in the last 12 months, with the median being 3, according to a survey of 471 employers by XpertHR.

Some 13 per cent of employers said they 'routinely' used them to facilitate employee departures.

Turn the clock back to 2011, and a survey from the Chartered Institute of Personnel and Development found less than 70 per cent of employers had used compromise agreements within two years, with 21.5 per cent offering them 'frequently', and 7 per cent 'always'.

While the median was four compromise agreements in two years, the mean was a huge 37, reflecting their widespread use by very large organisations, some of which used more than 100 in that period.

Positive impact on difficult conversations

Even though 58 per cent of employers in the recent XpertHR survey said that the new settlement agreements had had no impact, 40 per cent praised their positive impact on broaching difficult conversations about departures.

The other major related change recently has been the introduction of tribunal fees. More than a quarter of employers think that fees have lessened the need for settlement agreements, because the threat of a claim has been diminished by its cost to employees. But just under half didn't agree with this view.

It appears that settlement agreements continue to be a useful and effective means of concluding an employment relationship.

Only a minority use them routinely, suggesting that most recognise they should not be relied on as an alternative to good management.

Settlement agreements are just one of several tools in the conflict-resolution box. Problems with employees are usually best dealt with by talking with them, and working together to resolve any difficulties.

Acas publications and services

Acas has detailed advice and information on Settlement agreements, including draft letters and forms, a statutory pdf icon Code of Practice on settlement agreements [1Mb] and a non-statutory guide, with more practical guidance: pdf icon Settlement Agreements: A guide [523kb].

Acas experts can visit your organisation and help you build effective working relationships, as well as show you what to do if things go wrong. See Disputes and mediation: how Acas can help for more information.

Practical training is also available on Conflict management, including Dispute resolution and Negotiating skills, as well as Handling difficult conversations and Employing People - A Practical Introduction.

For free, impartial advice and guidance visit Acas Helpline Online.

Visit the Acas Training Courses, Workshops and Projects area for more information.

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