Use this model letter when you have reached a settlement agreement with an employee who will be leaving your employment as a result, to enclose the settlement agreement.
The reasons for the exit should relate to unsatisfactory conduct, attendance or performance issues on the part of the employee.
A Settlement Agreement cover letter is typically used to introduce and accompany a Settlement Agreement, which is a legally binding contract between an employer and employee that sets out the terms of the employee's departure from the company, usually in exchange for a financial settlement.
The purpose of a Settlement Agreement cover letter is to provide context and explain the terms of the agreement to the employee, as well as to provide instructions on how to proceed with signing the agreement. The cover letter should typically include:
In summary, a Settlement Agreement cover letter is an important document that helps to ensure that the terms of the agreement are clearly communicated to the employee, and that the agreement is executed in a legally valid manner.
The settlement offer must be a genuine attempt to settle an existing dispute, i.e. a situation where you or the employee has brought, or might reasonably be expected to bring, legal action against the other and that this situation is ongoing at the time this settlement offer is made.
An existing dispute is likely to be true if, for example, you've previously warned the employee that unless their performance or behaviour improves, disciplinary action will be taken, which could result in their dismissal, or an employment relationship has already ended and the employee has taken action against your business, or has indicated that they intend to do so.
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Settlement agreement cover letter template
Settlement agreement template
Our Settlement Agreement Template facilitates fair and clear resolution, easing legal processes for both parties involved in employment separation.
Dear [ Recipient first name ],
Without Prejudice and subject to S111A Employment Rights Act 1996
We are writing to you regarding the proposed settlement agreement that has been offered to you. This agreement has been offered to you following discussions between you and your employer, [ Company Name ], and sets out the terms and conditions of your departure from the company.
As you are aware, the purpose of this settlement agreement is to resolve any potential disputes between you and [ Company Name ] and to ensure a smooth and amicable departure from the company. We believe that this settlement agreement represents a fair and reasonable offer, and we hope that you will agree to its terms.
The key terms of the agreement are as follows:
We want to emphasise that the settlement agreement is a legally binding document, and that by signing it, you will be waiving your right to bring any claims against [ Company Name ] in relation to your employment or its termination. We advise you to seek independent legal advice before signing the agreement, and we will pay up to £[ amount ] to your legal represenative should you choose to do so. The company requires that the person giving advice signs a letter in the form attached in the first schedule to the agreement.
We would be grateful if you could let us know whether you are willing to accept the proposed settlement agreement by [ Insert deadline for response ]. If you have any questions or concerns about the agreement or the process, please do not hesitate to contact us.
If the terms of the settlement agreement are acceptable, I will arrange for the organisation to make payment to you in accordance with the terms of the agreement.
Thank you for your cooperation and understanding in this matter.
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