One of the most common scenarios which leads to a settlement agreement is the commencement of performance management procedures – aka ‘PIP’ (performance improvement plan).
If an employer has sufficient concerns about your performance to the extent that they are willing to engage you in formal procedures, then they most likely want you to leave.
What to do if you’re facing performance management procedures
The first step for you is to either accept that the writing is on the wall and therefore it’s time to move on with the best possible financial start to a new job, or alternatively, to stay and fight for your current role.
Our advice would be to think long and hard about whether you have a future with that particular employer.
How many employees subject to performance management survive the process? How many go on to achieve a pay-rise or promotion? How many are happy in their role even if they survive the process?
The trust often goes between employer and employee once these matters are raised, and with that goes the future of the relationship.
Of course many employees pass performance improvement plans, and many go on to remain with the company for months, even years, and if that’s what you want to do then we would always encourage you to stand and fight, bearing in mind the above caveats.
The reason why this scenario is often the best in which to achieve a settlement is that both parties want a deal.
The employer at the very least recognises that there is a problem and wishes to resolve it one way or the other, and you recognise it may be time to move on rather than face performance management.
Therefore, you have the basis for an agreement: two willing parties.
It is increasingly common for an HR department to invite the employee into a meeting to commence performance management procedures and then have a ‘without prejudice’ or ‘protected’ conversation and offer a settlement agreement before the procedure has actually commenced.
HR departments have to be careful about this because, in certain circumstances, if you are unaware of any pre-existing issues and no performance process has started, there is a possibility that the offer will not be afforded protection (i.e. the conversation will be ‘on the record’).
If that’s the case, you will be in a stronger negotiating position as you can allege that the result of any performance management procedure is a foregone conclusion and therefore that the dismissal is potentially unfair.
Most employers get it right however and it is often legitimate to offer you an ‘either/or’ scenario: take the money and go now with a reference, or face the uncertainty of the procedure.
The employer usually makes the first move
When you are facing performance procedures, the employer often makes the first move in a negotiation.
This will probably be in the form of a meeting to discuss your performance followed by the implementation of performance procedures and may, or may not, also include a ‘protected conversation’ or ‘without prejudice’ meeting or letter.
If your employer has a protected conversation with you and makes an offer to terminate your employment rather than going through performance procedures, then you can respond to that offer by a letter.
If, on the other hand, your employer wishes to commence performance procedures, but you think this is the time to leave and you want to negotiate, then you should consider putting together a suitable without prejudice letter.
Short-circuiting the performance improvement plan process
What if you approach your employer with a solution to their problem?
Remove the risk of a tribunal claim, use your resignation as a negotiating tool and offer to remove yourself from the organisation, reduce the management time already committed, and all they have to do is pay you the money they would have had to pay anyway in taking you through these procedures?
This sounds ideal, and is how you should be pitching it to your employer.
You should be asking for your notice paid in lieu, a reference (and this is an important reason for you to settle a performance case) and the money it would have spent on your wages during the performance procedure paid gross as an ex gratia payment.
Your argument should go something like this: ‘You, my employer, are going to take six months to conclude an uncertain process at the end of which you have to pay me notice and I will retain my rights to sue for unfair dismissal, so we should conclude this now by you paying me six months’ gross salary, my notice and giving me a reference’.
Review our guide on negotiating a settlement agreement for more insight on how to structure this negotiation.
If your employer doesn’t accept your proposals, instead saying that it will more likely be three months, then it will often settle at between four and five months’ gross salary, leaving you to move on to another role with enough money to see you through.