Mediation is a more informal way of resolving workplace disputes. It involves a neutral mediator helping you and the employee reach an agreement. The process is voluntary and confidential.
Mediation is not normally legally binding unless both parties choose to confirm the outcome in a conciliated settlement or compromise agreement.
You could appoint someone from within your business as a mediator, though if you do, they should have appropriate training. However, you should consider finding an external mediator, such as one provided by the LRA, so that both you and the employee can trust them to be completely impartial.
There are also a number of commercial mediation providers. However, such providers will charge for their services.