Settlement agreement proposal letter template
Use this model settlement agreement proposal letter to enter discussions with an employee about ending their employment relationship.
This should only be used where there are previous or current disciplinary or performance management actions, i.e. there must be a dispute, or redundancy.
The letter includes the option of meeting with the employee to discuss the offer.
- 2 pages / 619 words.
- Last updated 07/12/2023.
- Designed for United Kingdom use.
- Suitable for use in other territories; check local laws first.
- Instantly download as Word / PDF / plain text, or send by email.
- Includes 12 months’ access, with all updates to this page provided free of charge and notified to you.
Settlement agreement proposal letter
[Sender name]
[Sender address]
[date]
[Recipient name]
[Recipient address]
Dear [Recipient first name],
Without Prejudice and subject to S111A Employment Rights Act 1996
We are writing to you because, as you are aware, we have had some concerns about your [conduct/attendance/performance] [delete as appropriate and specify sufficient detail about previous disciplinary/performance management action taken, and about the ongoing concerns, to allow the employee to make an informed decision about his/her options].
We consider that, in these circumstances, one option is to offer you a settlement agreement to bring our employment relationship to an end, and we invite you to consider the proposal set out below.
If we are unable to reach such an agreement, then you should be aware that it is our intention to proceed to the next stage of our disciplinary [or performance management] procedure [insert brief details of where the employee can reasonably access the appropriate written procedure.] I will therefore convene a disciplinary meeting to make a decision on these concerns, and that this could result in your dismissal.
You should note that there is no obligation for you to enter into discussions with us in relation to this proposal. If you choose to do so or not, please also note that any correspondence
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A settlement agreement proposal letter is a document that is sent by one party to another during a dispute or legal proceeding. The purpose of the letter is to propose a settlement agreement that would resolve the issues in the dispute without the need for further legal action.
The letter typically outlines the terms of the proposed settlement, including any financial compensation or other remedies that are being offered, as well as any conditions or requirements that would need to be met in order to finalize the settlement. The letter may also include a deadline for the other party to respond, and may indicate that the offer will be withdrawn if a response is not received by that date.
In addition to outlining the proposed terms of the settlement, the letter may also provide a brief overview of the issues in dispute and the reasons why the party is proposing the settlement. The tone of the letter is generally professional and respectful, and may express a desire to resolve the dispute in a way that is mutually beneficial to both parties.
Overall, a settlement agreement proposal letter is an important tool for resolving disputes and legal proceedings outside of the court system, and can help to save time, money, and resources for all parties involved.
It is usually delivered to the Employee by the Employer / HR.
Compliance
Compliance
This Settlement agreement proposal letter template incorporates relevant UK laws and HR standards, including those listed below:
- Employment Rights Act 1996: This act allows employers and employees to reach a legally binding agreement to end an employment relationship.
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Equality Act 2010: This act prohibits discrimination in the workplace on the basis of age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. A settlement agreement can ensure that any potential discrimination claims are settled and avoided.
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Data Protection Act 2018: This act sets out the requirements for the processing of personal data. Settlement agreements often involve the exchange of personal data, and the act ensures that this data is processed lawfully and in accordance with data protection principles.
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Working Time Regulations 1998: These regulations set out the maximum hours an employee can work in a week, and their entitlement to rest breaks and annual leave. A settlement agreement can include provisions relating to the employee's entitlement to holiday pay and time off.
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Health and Safety at Work Act 1974: This act places a duty on employers to ensure the health, safety, and welfare of their employees. A settlement agreement can ensure that any potential health and safety claims are settled and avoided.
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National Minimum Wage Act 1998: This act sets out the minimum wage rates that employers must pay their employees. A settlement agreement can include provisions relating to any outstanding payments or arrears owed to the employee.
Flowchart
Flowchart
Check which resources should be implemeted before and/or after the Settlement agreement proposal letter template, to understand the workflow.
Protected conversation script
Our Protected Conversation Script Template facilitates sensitive discussions, allowing employers to explore options without risk of legal recourse.
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.
Frequently Asked Questions
Frequently Asked Questions
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Can I use this template in my small business?
Yes. The Settlement agreement proposal letter template is designed to be flexible and suitable for organisations of all sizes, including small businesses and charities. It follows UK employment law best practice, so even if you don't have an in-house HR team, you can confidently apply it.
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Is this template compliant with 2025 UK employment law?
Absolutely. All of our templates are drafted with the latest ACAS guidance and UK employment legislation in mind. We review and update them regularly, so you can be confident they remain compliant.
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Can I customise it for my organisation?
Yes, we highlight the areas that you need to update with your own details, and where you need to make decisions to suit your situation. This saves you time and ensures that you meet best practice.
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Do I get instant access?
Yes. Once purchased, you'll be able to download it instantly. Templates are provided in editable Word or Excel format so you can customise them easily, and in PDF format for easy sharing.
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What if I need more help, not just this template?
If you're looking for broader support, we also offer toolkits and library bundles that include this template, along with other HR templates and policies for fully managing your situation. These may be more cost-effective if you need deeper advice.
