A GUIDE TO REDUNDANCY SETTLEMENT AGREEMENTS

Employees made redundant after two or more years at their workplace are entitled to statutory redundancy pay. You do not need to sign an agreement to be entitled to this.

But settlement agreements are becoming increasingly common when making redundancies. Usually, the employee agrees agree to waive their rights to make potential claims against the employer in return for enhanced redundancy pay or benefits. Agreements may also include non-disclosure agreements or restrictive covenants that differ from the employee’s contracts.

For the employer, this removes the risk of legal claims. Even if they are certain that their redundancy process was fair and correct, defending a claim (such as unfair dismissal or discrimination) can be costly and time-consuming. It is often cost-effective to offer enhanced redundancy pay to remove this risk.

VOLUNTARY REDUNDANCY

Settlement agreements are particularly common in voluntary redundancies. As the employee has not been selected through a redundancy process, it is sensible to have a legal agreement confirming that the employee volunteered for redundancy and is happy to leave their role. Agreements also set out the terms to end the employment, such as termination date, references and notice periods.

Read more about redundancy

WHAT IS THE PROCESS?

If you are happy to accept the agreement, you will need a solicitor to talk you through the meaning of each term. This is required for the agreement to be legally binding.

Most employers contribute towards the cost, with the amount based on the complexity of the agreement and how long it will take to advise you. In most cases, we accept this contribution to cover the work, and there is no additional cost to you. (If the contribution is particularly low, or the agreement needs a lot of changes, we may need to discuss additional fees from you or your employer, but we won’t do any work until this has been agreed).

Once you have instructed us, we will hold an appointment to talk you through each of the terms and what they mean for you in practice. You and your employer will sign the agreement to make it legally binding. We will deal directly with your employer regarding payment.

WHAT IF I’M NOT HAPPY WITH THE SETTLEMENT?

If you are not happy with the settlement offered, you are not obliged to accept to it. You may lose any enhanced payment and terms, but your employer cannot refuse you statutory redundancy pay.

You may be able to negotiate your agreement. If you are being asked to waive your rights to future claims and agree to non-disclosure clauses, your employer should offer something above statutory pay in return.

What is a realistic settlement will depend upon the circumstances. For example, you will be in a stronger position if you have a specific claim to waive, rather than speculatively waiving hypothetical claims.

We can analyse any potential claims you have and advise on potential negotiation, and what would be a reasonable settlement to aim for. We can negotiate with your employer on your behalf. It is important to note that your employer’s contribution does not pay for this work. We have occasionally negotiated an increased contribution from your employer to cover the back and forth, but it is not guaranteed.

WHAT IF THE REDUNDANCY IS UNFAIR?

If you have been unfairly selected for redundancy, this may be grounds for an unfair dismissal claim. You may even have a claim for discrimination if a protected characteristic influenced your selection for redundancy.

You and your employer may reach an agreement to settle this claim. The stronger your claim, the stronger your position to negotiate the settlement.

If you are unable to reach an agreement, you could pursue a claim through the tribunal. When negotiating a settlement, you should consider the cost, stress and risk of a claim, balanced against the potential financial outcome.

NEXT STEPS

If you have been offered a redundancy settlement agreement, or have a claim for unfair redundancy to settle, we can help you to understand your position and negotiate with your employer.

GET IN TOUCH

SCHEDULE AN INITIAL CALL

Please leave blank:

Full name:

Phone:

Email:

Preferred callback date:

Preferred call back time:

How did you hear about us?

Brief summary of your enquiry:

We take your privacy seriously and will only use the information you provide on this contact form to deal with your enquiry. Please see our Client Privacy Policy for more detail.