Dr Frank Ellis was suspended in March while the university investigated his comments but is now retiring early and will receive a year's salary and a contribution towards his legal costs.
The University and College Union's Leeds University president Gavin Reid said: "Who would wish to work or study at a university that would not be willing to meet its obligations under the recent Race Relations Act?
"We supported the instigation of the due disciplinary procedures at Leeds. We must be concerned that the investigation of Dr Ellis does not appear to have run its course and we must question the money spent in reaching a settlement of this kind if the law cannot be shown to have been observed."
Dr Ellis was reported to have told the Leeds Student newspaper that there is a "persistent gap in average black and white average IQ."
The Russian and Slavonic Studies lecturer was also alleged to have told the student newspaper that feminism and multiculturalism were "corroding" Britain.
The university said it was investigating whether he had breached race relations law and ignored instructions not to repeat his views.
A spokeswoman said: "Dr Ellis was entitled to the same employment and pension rights as his colleagues, and he was also entitled to retire from his job.
"His departure from the university renders the whole disciplinary process irrelevant, since that process was about Dr Ellis promoting unacceptably racist views on our campus. He will not do that again."