Use this checklist to make sure you get it right

Settlement discussions enable employers to have confidential discussions with an employee about exiting them without the risk of the conversation being used against them in any subsequent unfair dismissal claim provided certain steps are taken.

Many of our clients are using these discussions to exit poor performers or those behaving badly.  However the process is not as straightforward as it seems and there are significant risks if you get it wrong.  This checklist will help you to decide if a settlement discussion is the right way to deal with the problem and how to minimise risk if you do so.

1 Agree who within your organisation can initiate a settlement discussion and whether they need to consult with HR or a more senior manager before doing so.

2 Make sure that authorised individuals are properly trained and understand how to “safely” have a settlement discussion.

   Do you need a policy?  Are there any circumstances in which it is never considered appropriate to have a “settlement discussion”, if so, what are these?

3 Decide whether a settlement discussion is the best way to deal with the situation.

   3.1 Consider the implications for the employment relationship if an agreement cannot be reached. 

   3.2 What message are you sending out?  Will this have other implications for the workforce?

4 Obtain all relevant information about the employee.

   4.1 What are the background issues?  Are you absolutely confident that there is no unlawful discrimination or victimisation? 

   4.2  Is there a risk that the employee will accuse your organisation of discrimination if you attempt to use a settlement discussion to get rid of them – “you’re only dealing with me in this way because I am                 black/gay/disabled/old” etc?

  4.3 Has the employee been disciplined for similar conduct?  How long ago?

  4.4 Have you already started an informal or formal performance procedure?  Why do you think it is not working? 

5 Avoid having a settlement conversation “out of the blue”.  There must be a clear basis for making the approach.

If the employee has no hint that his behaviour or conduct is unacceptable, he is likely to be defensive and you are unlikely to achieve an agreed settlement.

6 Ask the employee to attend a meeting to discuss his behaviour or performance on a mutually convenient date. 

  Explain that the meeting is voluntary and will be a “settlement discussion”.  Briefly explain what this means i.e. that the discussion will be “without prejudice” or “off the record” and will be inadmissible in legal    proceedings.  Explain that you hope that this will enable you and the employee to have a frank discussion about the issue/s. 

7 Decide whether you will allow the employee to be accompanied at the meeting. 

   Note – ACAS recommend that employers should allow employees to be accompanied at the meeting by a trade union official, representative or a work colleague, but you are not obliged to do so.

8 Prepare carefully for the meeting.

   8.1 At the start remind the employee of the purpose of the meeting and that any discussions will be inadmissible in legal proceedings (which you hope will not be necessary in any event)!

   8.2 Explain to the employee that he must keep the discussion confidential.

   8.3 Be careful about the language you use and the impression it may give to the employee. 

        Do not:

  •        Threaten the employee “take the offer or else you will be sacked.”
  •        Appear aggressive, impatient or condescending “I’ve only got 10 minutes to discuss this with you” etc (you may need to hold more than one meeting before you reach an agreement or decide that you are not able        to do so).
  •        Tell the employee that he has to make up his mind quickly, or the offer will be withdrawn (employees should be given no less than 10 calendar days to consider a written offer).
  •        Put the employee on “gardening leave” to consider the offer.

9 Negotiate sensibly

  9.1 Decide in advance what financial offer should be made and the maximum that you are prepared to pay.

        Factors to consider:

  • Length of service (remember all new employees need two years’ service to bring a claim of ordinary unfair dismissal).
  • How long will it take before you will be in a position to fairly dismiss the employee or resolve the problem?
  • Notice and any other contractual entitlements, including any untaken annual leave.
  • Previous settlement figures.
  • How long it might take the employee to find another job.
  • The possible liabilities and costs involved in dealing with any potential tribunal or court claim if the issue is not settled.

   9.2 Will you provide a reference?  What will it say?  (Remember that any reference that you write must be true, accurate and fair).

   9.3 Prepare a settlement agreement or letter in advance, which you can give to the employee if the meeting progresses well (Note – the 10 day minimum time limit will only start to run from the date the employee is    given the settlement agreement).

   9.4 Listen to what the employee has to say and be prepared to negotiate with him or his representative within the reasonable limits you have set.

10 Comply with the statutory provisions regulating settlement discussions and agreements. 

    10.1 Put the offer in writing (by way of a settlement agreement).

    10.2 Allow the employee at least 10 days to consider it (unless the employee agrees to a shorter period but do not pressurise him to do so).

    10.3 Allow the employee to take independent legal advice (and be prepared to pay a reasonable sum for this if agreement can be reached).

Remember: if agreement cannot be reached, you will need to continue or start your internal processes to deal with the issue.

The employee may well refer to the settlement discussion during other internal processes such as disciplinary or grievance proceedings.  If he does, you will need to remind him that the discussion is inadmissible and that you will redact any reference to it in any written documentation.