Settling Employment Disputes

Author: Matthew Kilgannon

Employment disputes are inevitable and will often result in the employer seeking to terminate the employment relationship. As an employment lawyer, I advise both employers and employees on their duties and rights in settling employment disputes. For most people, the best way of resolving such disputes is through the use of a Settlement Agreement; an alternative solution that avoids long drawn out litigation and an Employment Tribunal.

What is a Settlement Agreement?

A Settlement Agreement is a legally binding contract between an employee and an employer. It means that the employee’s employment comes to an end on an agreed date and, in return, the employee agrees to settle/compromise his/her claims (where compensation upto a maximum of £30,000 can be paid tax free). The Agreement gives the employer certainty that the employee will not bring any future claims against it. However, for the agreement to be binding the employer should have the agreement drafted by a Solicitor (to protect its interests) and the employee must take independent legal advice.

How can a Settlement Agreement be achieved?

Previously, seeking to settle an employment dispute was fraught with risk; however, in 2013 we saw the introduction of “Pre Termination Negotiations” (more information can be found on our website). In brief, Pre Termination Negotiations give employers and employees the ability to have confidential and “off the record” discussions.

However, such discussions have their limitations, in that, they only apply to claims for unfair dismissal (so claims for discrimination are not covered) and employers need to consider what will happen if an offer is rejected.

Other factors to consider with an employment dispute

In 2013, further changes were introduced, which must be taken into consideration when negotiating the terms of a Settlement Agreement. There is now a cap on the amount of compensation that can be awarded for a claim for unfair dismissal (it is fixed at the lesser of one year’s salary or £74,200).

Also, if an employee wishes to issue a claim of, say, unfair dismissal, it will cost £250 and they will have to pay a further £950 for a tribunal hearing.

Further changes to employment law are expected in April 2014. These include the possibility that an employer who loses at Tribunal, will have to pay a penalty of 50% of the award (subject to a minimum of £100 and a maximum of £5,000). Interestingly, this payment is to be paid to the Secretary of State, not the former employee.

Also, parties will be required to engage in conciliation before a claim can be issued. This potentially places additional burdens on the parties, although the overall aim of the change is to try to minimise the number of claims issued at Tribunal.


It is too early to tell whether all the above changes will mean a reduction in the number of Tribunal claims being issued. What is clear from the work we see is that there are now more ways than ever to satisfactorily resolve workplace disputes.

If you have an employment dispute and would like further advice, please contact the writer, Matthew Kilgannon at or 01932 506877.