Termination by mutual consent letter

You can use our letter where there’s a mutual agreement that an employee will leave your employment.

Termination by agreement

To succeed in a claim for unfair dismissal, amongst other matters, an employee needs to establish that they were dismissed. However, there’s no dismissal where employment has terminated by the mutual agreement of the parties. This is often referred to as termination by mutual consent and is the purpose of our Termination by Mutual Consent Letter. The parties to an employment contract are free to agree between themselves to terminate that contract, with or without a financial settlement, and the agreement may be oral or in writing, but for evidence purposes it’s advisable for it to be in writing. Our letter sets out that you and your employee have mutually and voluntarily agreed that the latter’s employment will terminate on an agreed date. There’s the option also for you to make an ex gratia payment as a financial settlement. Finally, it asks the employee to acknowledge that they have no claim against you for any matter arising out of their employment or its termination.

Tribunal scrutiny

In some cases, there may be a question as to whether the termination is truly by consent where the employee has been offered little or no choice in the matter, e.g. they’ve been put under undue pressure at a meeting to sign the mutual consent letter or face immediate dismissal, without the benefit of legal advice. An employment tribunal will scrutinise the apparent arrangement to satisfy itself that the employee genuinely consented to the termination and wasn’t coerced into it to deprive them of their statutory rights. If the cause of their willingness to consent was the threat of dismissal, the tribunal is likely to find that your actions mean that there was, in fact, an actual or constructive dismissal.

Claim risk

Our letter won’t, of itself, prevent the employee bringing an unfair dismissal claim. It will simply provide strong evidence that there was no dismissal. To protect yourself against tribunal claims, you would have to use a settlement agreement to terminate the employee’s employment – see our Settlement Agreement.