Settlement agreement cover letter
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.
10 mins
300
What is a Settlement agreement cover letter?
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:
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A brief explanation of the circumstances leading to the agreement
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A summary of the terms of the agreement, including any financial settlement or other benefits offered
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An explanation of the legal implications of signing the agreement
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Any relevant deadlines or other important information
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Contact information for any legal representatives who may be involved in the process
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.
The Employer (you) to the Employee
Great Britain & NI (United Kingdom)
What legislation and best practice guidelines have been taken into account in the development of this template?
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Employment Rights Act 1996: Provides the legal framework for settlement agreements and the documentation associated with them.
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Equality Act 2010: Ensures that the language and content of the cover letter do not breach anti-discrimination laws or prejudice fairness.
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The ACAS Code of Practice on Settlement Agreements: Offers guidance on communication and documentation related to settlement agreements, including cover letters.
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Data Protection Act 2018 (incorporating GDPR): Requires that personal data within the cover letter complies with data protection principles.
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Common Law Principles: Legal principles and precedents guide the content and context of settlement agreement cover letters.
In which communication or process sequence does this template belong?
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