Terminating an employment relationship by agreement – Mutual Termination Agreements

When the working relationship between the Employer and Employee deteriorates or the termination of relationship becomes a necessity, the question arises: “Where do we go from here to end it?”

An employee can be dismissed for misconduct, incapacity or operational requirements. Normally these types of dismissals require procedures, which can be a challenge in itself and costly if you need to hire a professional. The Employee furthermore has the right to challenge the dismissal at the CCMA with the risk of an arbitration award of up to 12 months’ salary for an “unfair dismissal”.

The Employee can also decide to resign and leave the place of employment. If they do not however want to resign, the Employer still needs to take some sort of action.

There is an alternative available to the parties to end the relationship on a more amicable way and it is called a “Mutual Termination Agreement”, “Mutual Separation Agreement” or Settlement Agreement.

Some reasons why such a package might be offered to an Employee, may include the following:

  • Avoid the hassle of following procedures to dismiss the employee;
  • There might not be enough evidence for a dismissal, but the relationship has deteriorated;
  • The Employer wants to assist the Employee by rather settling than have them sit with a bad record;
  • Avoid any further chances of CCMA procedures;
  • Employee is incapacitated and parties do not want to go through procedures and Employer is willing to assist or pay a package.


There can be many more reasons, but these are just a couple of examples.

The benefit of a mutual termination is that it is one of the quickest way to end the employment relationship. Such an agreement must be concluded by mutual consent.  

This is an acceptable practice by the CCMA and the Labour Court. In Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and Another (2016) 37 ILJ 2723 (CC), the Constitutional Court (“the CC”) considered the validity of a mutual separation agreement and re-affirmed that such agreements are lawful, even if they waive an employee’s right to seek judicial redress through the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) and the Courts.

A general principle is that it should be in writing and clearly state the terms and that it is in full and final settlement of all obligations between the Employer and Employee.

It is always best to explain to the Employee exactly what it means and what the implications of signing the agreement are. Have a witness present and all parties need to sign it in each other’s presence.

The Employer must ensure that the Employee is not forced into the agreement (“under duress”) and that he/she has a choice to sign it and what the alternative to signing it might be. In Metjielies v Stratostaff (Pty) Ltd t/a Adecco (P 294/12) [2015]
ZALCPE 3 (27 January 2015), the ruling made it clear that an employer cannot waive his responsibility to make sure that the employee understands the agreement.

If the Employer offers this kind of an agreement to an Employee, there are normally some sort of compensation or advantage to the Employee above and beyond what is due and payable to him/her by law.

Caution must be observed when entering into a settlement agreement. It is advisable that you acquire assistance from professional to ensure that it is done correctly and that the wording is clear and covers all aspects.

I have assisted many Employers and Employees to enter into amicable agreements and avoid dire situations and/or lengthy and costly procedures.

I can be contacted via e-mail on charmaine@trigonlaboursolutions.co.za to assist with a Mutual Termination Agreement.