Introduced in 2008, the mutually agreed termination was designed to streamline the procedure for terminating permanent contracts and to encourage amicable separations by promoting direct negotiation between employer and employee. The process is indeed less costly and simpler than that of dismissal on personal grounds, the latter requiring a genuine and serious cause and leading to legal proceedings in 25 per cent of cases. A mutually agreed termination allows an employment relationship to be ended by mutual agreement, preserves eligibility for unemployment benefit and enables negotiation (regarding severance pay and the departure date). This note summarises the findings of Carry and Schoefer (2024), who conduct an evaluation of the proportion of dismissals that have been replaced by mutually agreed terminations and identify the factors that may prevent the use of mutually agreed terminations.
Using administrative and survey data, the authors find that only 12 per cent of dismissals for personal reasons result in a mutually agreed termination (accounting for 24 per cent of all mutually agreed terminations). These converted dismissals are not the ones that would have led to litigation before the industrial tribunal. These are dismissals that were already more amicable in nature, such as those occurring three years before retirement age. A new survey of human resources directors highlights the importance of conflictual relations between employers and employees as a barrier to the use of Mutually agreed termination during a dismissal. Three main factors emerge: hostile working relationships, the use of Dismissal as a disciplinary tool to discourage certain behaviours, and differences of opinion regarding the outcome of a dispute. Finally, whilst few mutually agreed terminations are used as an alternative to dismissals, estimates suggest that the majority replace resignations or continued employment.
