Settlement and settlement

The settlement refers to the document and act that designates the end of an employment relationship between an employer and an employee, which is signed by them of their own free will.

The settlement Is the set of responsibilities to pay of an employer, for the benefit of an employee, when the employment relationship comes to an end.

If the cause of dismissal is not the responsibility of the employee, it is common for him to receive some type of compensation.

What is a settlement?

The settlement refers to the end of the employment relationship between an employer and an employee, through the presentation of a document that verifies the termination of the same.

This document represents the formality of the agreement between the parties that sign it, and contains the rights and obligations that are pertinent to each case..

It establishes those benefits, labor benefits and liquidation that should be compensated, as well as the resignation to any future claim of the concepts contemplated in it..

The validation of the settlement is carried out in front of a witness, who has the legal power for this purpose. In the settlement act, it is confirmed that the parties act of their own free will. The existence of any coercion would invalidate its legal validity.

Once both parties sign, the term of the contract or labor agreement between them is given, extinguishing any responsibility, monetary or otherwise, contemplated in the settlement document.

In some countries, the money that an employee is owed for the work performed, at the time of the termination of the employment relationship, is also called a settlement.

Settlement characteristics

• It is a bilateral process.
• The settlement document is a legal proof of the termination of the employment relationship.
• The signature of the same is voluntary.
• It contains the obligations to be liquidated on the part of the employer.
• Can be signed in compliance or non-compliance.
• It has a liberatory nature: it implies the waiver of subsequent claims, regarding the obligations contemplated in the settlement document.
• Both interested parties must appear personally or through legal representation.
• According to the legislation, the employee has the right to the presence of a witness: notary, auditor, inspector, etc..

Causes of the settlement

• Voluntary resignation.
• End of the hiring period.
• Dismissal with or without justification.
• Disability or death.
• Justified serious misconduct committed by the employee or the employer.

Settlement and employer responsibilities

The settlement document contains the employer's responsibilities (liquidation and compensation) and confirms that these have been paid. In this are dictated the provisions of resignation to any claim by the employee, as well as their agreement on the benefits received.

However, it is also possible that there is no type of employer financial responsibility. Which means that a settlement does not always imply that a settlement takes place.

Witnesses in a settlement

It can be a notary, an auditor, inspector, lawyer, union representative or another person with legal power for such situation.

At the time the parties appear, the witness has the task of attesting that both parties (or their legal representatives) are present, that they act of their own free will, accepting the conditions found in the settlement..

In addition, it can be requested by the employee, helping him to clarify any doubts about the content of the settlement. In any case, in some countries the absence of a witness does not detract from the legal validity for settlement purposes..

Effects of the settlement

The settlement has character liberatory. Once signed, it is proof that the employer is free from responsibilities to the employee. Therefore, the document must present everything without ambiguity, and the voluntary agreement of the parties must be explicit..

When the settlement is signed, this is proof that the employment relationship has been extinct.

The employee can also sign with the expression "not compliant", making explicit his disagreement with the terms of the settlement. This can happen if you are not sure of the concepts contained in the settlement, or because you want to make a subsequent claim.

In any case, if you consider that your rights have been violated, you could claim through the legal means that are in force in your country..

Concepts contained in a settlement

• Debts of the employer with the employee: wages owed, unearned vacations, severance payments, unpaid incentives, unpaid overtime worked, etc..
• Deductions: anticipated wages, anticipated vacations, lack of notice, and any other effect that is owed by the employee.

What is a liquidation?

The liquidation refers to the responsibilities to pay that an employer must assume, for the benefit of an employee, when the employment relationship comes to an end, due to resignation, dismissal or death, among others.

In addition, it is possible that the employee receives compensation along with his settlement, provided that he has not incurred a serious fault that was the reason for the end of the employment relationship..

The employer's obligations to the employee may continue to be owed even after the employment relationship is terminated.

Settlement features

• This seeks to settle pending accounts that an employer has with an employee.
• It is motivated by the termination of an employment relationship, as well as can refer to the usual payment of benefits (monthly payment, biweekly, etc.), during the hiring time.
• Usually, all its concepts are contained in the settlement.
• It can be accompanied by compensation, in the event that the end of the employment relationship is not caused by the employee.
• In some laws, it is known as "settlement" only to liquidation, when there is also compensation.
• There may be deductions in the amount to be paid to the employee, due to advance payments.

Settlement and compensation

The settlement may be accompanied by a compensation. This occurs when the employee resigns for just cause, due to a serious misconduct by the employer, in the case of an unjustified dismissal or the company ceases to exist, among other reasons..

That is, the employee must be compensated when he has not been responsible for the end of the employment relationship or due to some negligence.

Liquidation and settlement

Depending on the country or region, settlement is known in different ways. For example, in Mexico it is called "settlement" to employer obligations, which involve the payment of labor obligations.

The cause of this settlement may be due to a voluntary resignation, resignation due to serious misconduct, justified or unjustified dismissal, death or disability. The items to be paid in this case are unearned wages, bonuses, bonuses and vacations.

Elements that influence the calculation of the settlement

Several factors influence the amount of money that will be paid to an employee. It is also important to consider the reason that led to the end of the employment relationship.

The legislation of each country may contemplate more or fewer obligations to pay and different situations in which they apply or not. For this reason, it is important to find out about the specific responsibilities in each case..

Concepts contemplated in the settlement

• Seniority (years worked).
• Wages owed (monthly).
• Unearned vacation.
• Unearned social benefits.
• Seniority and other premiums.
• Compensation, when the employee is not responsible for the reason for the end of the employment relationship.

Causes of a liquidation

• Voluntary resignation.
• End of the hiring period.
• Disability or death.
• Dismissal with or without justification.
• Serious offense committed by the employer.