When an employer is looking to make redundancies, a settlement agreement can be a helpful tool. By agreeing to terms with an employee ahead of time, it can save the time and expense of a lengthy redundancy process.

As the ongoing financial impact of Covid-19 takes its toll, businesses are being forced to make redundancies. Those being let go are often offered a settlement agreement, a legal agreement between employer and employee. Settlement agreements provide a payment in return for an undertaking not to pursue a legal claim against an employer. A settlement agreement is an onerous document, waiving important legal rights, and it is essential that both sides take legal advice before signing. Because employees will be waiving important legal rights, they will need to take legal advice from an employment solicitor or trade union rep before signing. The agreement will not be valid without their sign-off. The corporate climate 2020 Despite the best efforts of the government to protect jobs and the economy, the pandemic has caused widespread turbulence in the commercial world. With the Coronavirus Jobs Retention Scheme ending, businesses are taking a realistic look at their future. For many, particularly in hard-hit industries such as hospitality, leisure, travel and retail, tough decisions are being made. In other less affected areas, management teams are still reorganising and reassessing how many staff they need and what their roles will be in the new working environment. The result will undoubtedly be the loss of many jobs. For the employer, there is a risk of legal action from an employee who may feel they have been unfairly chosen for redundancy or may have a grievance. A settlement agreement allows the employer to avoid this and effectively pay the employee an enhanced redundancy amount in exchange for a ‘clean break’. Settlement agreements also gives the employer the chance to end employment quickly, by avoiding the full redundancy process which involves consultation periods and review procedures and can be costly in terms of time. Our article, Settlement agreements – everything you need to know provides more information. What is a fair settlement agreement? In redundancy cases, it is worth ascertaining whether your position is going to be replaced in whole or in part. If not, it will probably be hard to argue against a genuine redundancy situation. Compensation will also potentially be limited to the amount of time it takes to run a fair consultation process, plus the statutory redundancy amount. However, you may have been chosen for redundancy from a group of people – some of whom are being made redundant and some of whom are not. In these cases, it may be possible to challenge your selection, particularly if your experience is better than those remaining, or you believe you were chosen because of discrimination or victimisation. The ‘value’ of unfair dismissal When negotiating a settlement with an employer, it is essential to take settlement agreement advice. Redundancy law is complex and it is important to ensure that everything to which you are entitled is included in the agreement. A structured settlement would usually include some or all of the following elements: A notice payment, if you will be leaving before working out your notice period; A compensation payment for losing your job, to include redundancy payments to which you may be entitled; Bonus and/or commission that may be due to you; Unused holiday pay; An enhanced redundancy payment which higher than the minimum statutory amount. Calculate your statutory redundancy entitlement. Information about when any medical insurance or other similar benefits will end. The amount offered will usually be calculated by looking at factors such as the length of your employment, the reason for offering the settlement agreement and the difficulties that might be encountered if a settlement agreement is not made, such as the length of time it might take to go through an alternative process or the cost and time involved in dealing with an employment tribunal. It is a legal requirement that anyone signing a settlement agreement seek advice from employment solicitors or other specified adviser such as an accredited trade union rep to ensure that they understand the implications of the document. Your solicitor will also be able to deal with settlement agreement negotiations if you do not wish to do this yourself . Your employment solicitor will seek an improved offer and ensure that a fair sum is paid to you. They will also see that there are no unfair terms you are not happy with . For more information about negotiating a fair settlement, see our article Settlement agreement negotiations . Additional settlement agreement terms As well as the financial element, a settlement agreement will include a number of terms binding both you and your employer. The following are some of the most commonly included: Provision of a good reference to give to potential new employers. This is preferable to a standard factual reference which would merely refer to the dates you were there, job title and other basic facts; Tax indemnity, which might cover you in the event of a tax demand in respect of your employment, to include interest, penalties, expenses and costs; Confidentiality clause, to prevent any information about the settlement agreement or surrounding issues from being discussed; Non-derogatory clauses, preventing either party from making derogatory statements about the other; Payment of the employee’s legal fees, which are normally funded at least in part by the employer; Agreement of the wording of any formal announcement that is to be made about your departure from the company; Agreement that the employee will provide reasonable assistance to the employer in the event that information or evidence is required about something which occurred during the employee’s time with the business. All of the above should be carefully worded and considered before the agreement is signed to ensure that the employee understands and is happy with the extent of their liability and rights. Who pays the legal fees? Because it is a legal requirement that an employee seek independent legal advice before signing, the employer usually pays the employee’s legal costs of the settlement agreement advice plus the VAT. This will be capped at a certain amount and is usually sufficient only to cover employee legal expenses directly related to the employment solicitor signing the agreement off, and not negotiating a higher amount of money or changed terms. As with the rest of the agreement, this clause relating to payment of fees is negotiable. Getting the best outcome It is important to ensure that your settlement agreement covers everything you wish to receive, as it constitutes a final break with your employer and you will not be able to bring proceedings against them after it has been signed. A major part of the agreement relates to the redundancy settlement. Your employment solicitor will be able to discuss with you whether you have been offered a fair sum in the circumstances and explain the situation regarding any settlement agreement tax to ensure that this is taken into account. There are certain criteria that must be met when a settlement agreement is made and your solicitor will check that all necessary clauses have been included and all issues fairly addressed. A settlement agreement is usually beneficial to both employer and employee, allowing them to make a clean break and part with certain assurances on both sides.  Contact us At Springhouse Law we have extensive experience of negotiating and agreement settlement agreements and redundancy payments. If you have been offered a settlement agreement and you would like independent advice to ensure it is in your best interests, our experienced settlement agreement solicitors will be happy to help. Contact us today by ringing 0800 048 5888 or fill in our contact form . Our team is ready to give you clear, accurate advice.

Can I make more than 20 employees redundant? Yes, you can make more than 20 employees redundant. However, you will need to follow the proper procedures and consult with your employees first. You should also consider other options such as retraining or redeployment before making any final decisions. If you are making under 20 people redundant then there are no rules about how they should carry out the consultation. If they’re making 20 or more redundancies at the same time, the collective redundancy rules apply. The collective redundancy rules apply when an employer proposes to dismiss 20 or more employees at one establishment within a period of 90 days or less. The below guide outlines the steps to take when the redundancy guidance rules are applicable: In a collective redundancy situation, the employer must consult with representatives of the affected employees in good time before any decisions are made. The consultation must aim to reach an agreement on measures to avoid dismissals, reduce the number of dismissals and mitigate the consequences of dismissal. If an agreement cannot be reached, the employer must give notice of collective redundancies to the relevant government body at least 30 days before the first dismissal is due to take effect. The notice must specify the reasons for the proposed dismissals, the number and categories of employees affected, the proposed method of selection for dismissal, and the proposed timetable for the dismissals. After receiving notice of collective redundancies, the government body may decide to refer the matter to a conciliation service in an attempt to reach an agreement between the employer and employees. If conciliation is unsuccessful, the government body may order that no dismissals take place for a period of up to 90 days. This is known as a moratorium. During a moratorium, the employer and representatives of the affected employees must continue to consult with a view to reaching an agreement on measures to avoid or reduce the number of dismissals. If an agreement is still not reached at the end of the moratorium, the employer may proceed with the collective redundancies. In certain circumstances, collective redundancies may be exempt from the above rules. For example, where the dismissals are due to an economic, technical or organizational reason entailing changes in the workforce (known as an ETO reason), collective consultation is not required if the dismissals are for one of the following reasons: a business transfer or service provision change; the discontinuance of all or part of the employer’s business; redundancy due to a slump in demand for goods or services; redundancy due to changes in technology; or redundancy due to reorganisation which is not connected with a transfer or service provision change. Our expert employment law solicitors all have many years of experience advising individuals who are in your position. We will be able to guide you through the process and to help you secure the best possible outcome. We offer a range of services to those affected by redundancy, so please contact our friendly customer services team to discuss further via hello@kilgannonlaw.co.uk or 0800 915 7777.

Try to resist feeling pressured into signing a settlement agreement. It is important to take control of the negotiation. The first thing to remember is that this happens frequently. Nothing is binding until the agreement has been agreed and signed by you. Settlement agreements are long and complicated documents in which you will be signing away important legal rights. Take your time: get the best advice and make sure you are making the right decision. It is up to you whether to sign or not. What is a settlement agreement? A settlement agreement is a written contract between employer and employee. It is designed to prevent employees from bringing claims against their company or employer, in return for a cash payment . From an employer’s perspective, the purpose of a settlement agreement is to provide a ‘clean break’ from an employee without the risk of future legal claims being made against them. In return, the employee is given some sort of enhanced payment. See our article for more information on getting a job after a settlement agreement . Why has your employer asked you to sign a settlement agreement? Settlement agreements may also be offered in any number of situations, such as during performance improvement programmes, a disciplinary process, or a tribunal claim. The offer may arise when the employer feels there may be a risk of a legal claim being brought against them, but it may also be that they want a clean break in return for an enhanced redundancy payment. A final settlement may be offered at any time during the redundancy process. However, provided the redundancy is legitimate, it will most likely be given to an employee once the process has been concluded. Evaluating your position for a fair financial outcome By signing a settlement agreement, you are telling your employer that you are happy to leave the organisation. The alternative would be for your employer to dismiss you. Assess the situation and decide whether the employer could dismiss you fairly in any case. If they could, you will be in a weaker bargaining position. If they could not, your position will be stronger. For example, if you are being made redundant and a legitimate redundancy process has already been followed, you may find yourself in a weaker position to negotiate. Depending on how much you have been offered, you may feel more confident to push for better financial terms if it appears that your proposed redundancy is unfair. This could be because: you have been unfairly selected , a proper consultation has not been followed, or there appears to be discrimination. You may also feel at a disadvantage if disciplinary proceedings are ongoing, with the potential to end in dismissal for gross misconduct. Under the circumstances, it may be advisable to enter into the settlement agreement first. This could provide the best chance for a neutral reference. On the other hand, where a performance improvement plan is in place, an employer can only dismiss after fair opportunity has been given to achieve reasonable targets. This could take some time and may not be achievable. In that situation you will likely feel confident about asking for proper compensation.  Other financial considerations when entering an agreement There will usually be an amount in the settlement for a payment in lieu (instead of notice). You should ensure this includes the full notice period and all benefits (such as pension contribution, private healthcare, etc). Untaken annual leave will also be an important element of compensation. The tax treatment of any payments is also important because this affects the actual value of the deal to you. Only true ex-gratia and non-contractual payments will be tax-free up to £30,000. Payments such as those made in lieu of notice or untaken holiday will invariably be taxable. Deciding on a strategy Once the financial side of the offer has been considered, try to negotiate this upwards, or reject the deal altogether. You can then turn your attention to the other terms of the agreement, of which there will be many. Contacting an employment law specialist Because you will be signing away important employment rights, a certificate signed by a solicitor or other legal adviser is always necessary for a settlement agreement to be concluded. This is a legal requirement, and the certificate is part of the legal format. The agreement may need two certificates if the final working day is some way off. There will usually be an amount of money in the agreement to cover your legal costs. It is usually a good idea to contact a legal advisor sooner rather than later. Prudence and attention to detail are key . Remember: take your time and get it right. If you need help navigating this important decision, get in touch. With Springhouse Solicitors, you will have access to a wealth of employment law expertise. Contact us today to find out about our no-cost (to you) settlement agreement service .

Many people’s employment will end as a result of a mutually agreed settlement with their employer. This ensures that both parties can end their employment relationship formally – usually with the payment of a termination package recorded in a settlement agreement – but, without recourse to an employment tribunal. A person’s exit from their role may be initiated by the employer, or the individual, for a wide variety of reasons. However, reaching a negotiated settlement is usually far preferable to pursuing litigation, for both parties. We set out some tips for those who find themselves negotiating an exit. Hold your horses… If your employer has started discussions with you about a possible exit then it is quite likely you will be shocked and upset. But don’t burn any bridges just yet! Try to stay calm and dignified. The key is to consider what is being proposed rationally, focusing on what is in your own best interests. Take time to think about what is being proposed and don’t be afraid to say you need time to consider your position. Ideally your employer would agree to you taking paid leave while negotiations continue. Take your time and don’t feel pressured into agreeing anything “on the spot”. It is possible that your employer will present you with a draft settlement agreement during discussions. This can be helpful if it sets out fully the termination package which is being offered. However, never feel pressurised to agreeing to anything (either verbally or in writing). You should take any documentation away and read it at your leisure so that you can consider it fully and carefully. If your employer sets a deadline for response, remember that this is not binding and if you reasonably need more time, for example to take professional advice or talk to your family then say so. Understand your legal rights but don’t make premature threats about litigation By understanding your legal rights you can have some confidence about the strength of your negotiating position. If your position is not a strong one then it is best to know this early on. You can only make a decision about whether the termination package being offered is a fair one when you know what your potential, legally enforceable claims against your employer could be. However, you should not make empty threats about “seeing your employer in Court” as this could be counter productive and jeopardise future negotiations. Get professional advice Investing in professional legal advice early on could be a wise move and save you money further down the line. A lawyer will be able to advise you dispassionately on the strength of your position and is quite likely to be able to secure a better deal from your employer in the long run. If necessary a lawyer can negotiate with your employer on your behalf which could remove some of the stress of the situation. If your employer knows you are being professionally advised they may be more willing to reconsider the termination package they are offering and conclude matters more quickly. Dig out the paperwork It is only when you understand the rights conferred by your employment contract and associated documentation that you can assess if the termination package being offered is fair. So dig out your paperwork and read your employment contract to understand what you are entitled to. For example, how long is your notice period? If your employer proposes paying you in lieu does your contract specify that you will be paid basic pay only or should the value of your other terms and conditions also be compensated? Terms and conditions may not just be set out in your employment contract, they may also be set out in the staff handbook and other documents so don’t overlook any relevant ancillary documents. Insist on seeing the figures If your employer has not provided you with a draft settlement agreement or a written breakdown of the proposed termination package then insist on receiving this. If you are negotiating your exit face-to-face then always take a note of meetings and make sure any proposals made orally are confirmed in writing afterwards to avoid misunderstandings and to enable you to take advice on these later if necessary. Pensions and share options are valuable – don’t put them at risk Some of the most valuable benefits we can receive as employees are pensions and share options. How you exit your role can affect your entitlement. For example, if you are regarded as a “good leaver” you may still be able to exercise share options (and so make a profit) and some pension schemes are more generous if you are made redundant after a certain age or leave due to ill health. It is therefore important to agree with your employer why your employment is ending. Are there any “cost neutral” things you can ask for? Even if your employer is firm about paying you only a certain amount, are there any cost neutral things you can ask to be included in your settlement agreement? For example, the transfer of your mobile phone number to your own account, drafting your reference in a certain way or continuing to receive insurance benefits such as private medical for a set amount of time where the premium has already been paid – and the employer would therefore not receive a refund if it withdrew such benefits from you? Control the communications Does it matter to you how your exit is communicated to colleagues and customers? If so, try and agree any public communication with your employer and, have this set out in your settlement agreement. Finally, remember, if you don’t ask, you don’t get! A negotiation is a two way process so, don’t accept the first offer, there is no harm in asking for more – just keep the negotiations business like and professional! Settlement agreements were previously known as compromise agreements and it is worth bearing in mind that some compromise will probably be required and you won’t get everything you want. However, this needs to be balanced against the uncertainty, expense and stress of resorting to litigation. A negotiated exit can be a good thing for an employee as it brings closure and allows people to move on to a new chapter in their life, perhaps allowing them to do things they had not thought about before. Need advice on the settlement negotiation process? One of our experienced settlement agreement lawyers will be happy to assist you.

1. The agreement won’t be valid without one A settlement agreement will not be valid unless a legal adviser such as a solicitor has signed it off. You will usually therefore have no option but to use a solicitor, so the question becomes, how to make the most of them once they are on board. In some circumstances trade union representatives can sign agreements off, or legal executives, but the same process should apply to them. The reason for this is that most employment rights are set out in legislation. The legislation that sets them out usually requires that these rights cannot be given away by employees in any agreement or in return for any amounts of money unless a legal adviser of the right sort has advised the employee as to the terms and effect of the agreement, including their ability to bring these employment claims in the future. So, using a solicitor is usually a necessary part of any settlement agreement, and their fees, certainly in seeing the agreement through, will usually be covered by the employer in any settlement agreement. Employers will not usually cover the cost of negotiating the terms of the agreement, however, and your solicitor will need to seek theses in addition to the allowance already in the agreement. 2. Insurance Because such important rights are being given away in settlement agreements, the person signing off the adviser’s certificate will also have to have adequate insurance in place in case of any negligent advice. So the choice of solicitor, particularly a specialist employment lawyer, will mean that you have gold-plated insurance, plus the assurance of knowledge and expertise. 3. Negotiating more money Here’s why a solicitor is a good choice when it comes to negotiating up the compensation available in the settlement agreement. Other than a solicitor’s letterhead often working wonders, a solicitor will have a good view as to the level of legal risk that the employer is at should a settlement agreement not be concluded. A settlement agreement will usually be offered where the employer does not feel that they could achieve a fair dismissal, and a good solicitor will be able to spot this, and put forward a compelling case that the employer is at legal risk, and compensation should the matter progress to a Tribunal would be higher than the amount of money on offer in the agreement. Much will turn on negotiating style, and the impression that is given of the strength of your case. 4. Understanding the traps and pitfalls An employment law solicitor is also very good and well versed in the finer details in settlement agreements. This will relate to what is actually being settled in the agreement, and the terms of that settlement. Sometimes settlement agreements can be very onerous on employees, for instance in respect of what they are prevented from doing after signing the agreement, in the amount of compensation payments and in the tax treatment of them. Furthermore, settlement agreements as they are initially drafted tend to be very one-sided in favour of employers, and a good solicitor can achieve a better balance in favour of employees. Just as an example, if an employee is not allowed to say anything derogatory about the employer after signing the agreement, why shouldn’t the employer do the same for the employee? This can be very useful to employees, because it prevents a bad reference being given about them. 5. Shouldering the pain Potentially the most important benefit of instructing a solicitor can be that we are there to take the stress and brinkmanship away from the employee and onto our experienced shoulders. To sum up In summary, a solicitor who is well versed in settlement agreements and employment rights should be able to get a better deal, avoid any potential pitfalls, and make for a far less stressful process.

When you are in the midst of settlement agreement negotiations, one of your main considerations will be whether the financial package makes it worth signing or not. Several factors will come into play here. Usually these will be to do with the strength of your bargaining position, as the employee. A good way of looking at this is to ask the following questions: How easy would it be for my employer to dismiss me fairly in any case? How long would the dismissal process take? How much is the risk and hassle of not settling worth to the employer? Everything will turn on the circumstances of the proposed settlement agreement. How strong is your bargaining position? In redundancy cases, it is worth ascertaining whether your position is going to be replaced in whole or in part. If not, it will probably be hard to argue against a genuine redundancy situation. Compensation will also potentially be limited to the amount of time it takes to run a fair consultation process, plus the statutory redundancy amount. However, you may have been chosen for redundancy from a group of people – some of whom are being made redundant and some of whom are not. In these cases, it may be possible to challenge your selection, particularly if your experience is better than those remaining, or you believe you were chosen because of discrimination or victimisation. The ‘value’ of unfair dismissal A proper redundancy process also needs to be followed. If it has not, you will be in a stronger bargaining position during settlement agreement negotiations. Another important aspect is whether there are vacancies in the business you could fill. If your employer refuses to allow you one of these roles, it could give rise to an unfair dismissal. This would put you in a strong negotiating position. If you are being made redundant, and both the decision and process have been fair, you may find yourself in a relatively weak bargaining position. However, this does not prevent you from seeking the correct payments. Note that you usually need two years’ service to be able to bring an unfair dismissal claim in the employment tribunal. However, there are exceptions to this rule . Do not presume it applies to you. Settlements occurring outside of redundancies Another potential scenario is that the settlement agreement has been offered as part of a disciplinary procedure against you, or some sort of performance improvement process. Employees in these situations will need to look objectively at the likelihood of a fair dismissal. The stronger the possibility of a fair dismissal, the lower the claim should be settled for. It can be advantageous to leave early, before proceedings begin, to improve the chances of a decent reference. Conducting the settlement agreement negotiations In terms of the negotiation itself, it will be important for the employee to make the strength of their legal position clear, i.e. to point out why they would argue that a fair dismissal could not be achieved. The amount of money in the settlement agreement should be looked at from the point of view of a possible employment tribunal award. It is important to make the employer feel as exposed to legal risk as possible. The ‘feeling’ of exposure to legal risk is quite different from legal risk itself. This is where the involvement of an experienced employment lawyer will put you at an advantage. It is usually a good idea for employees to remain resolute. Remember: impression is everything. The employer will often be just as keen to settle as the employee. However, the employee ultimately does not have to agree and sign. How confrontational you become is an important judgement call; this approach is not always advisable but may reap financial rewards. You can find useful guidance on deciding settlement amounts in our Knowledge base. Choosing an employment law expert Representation by a solicitor is always a good idea and usually a worthwhile investment. Indeed, a solicitor will mostly have to be involved when signing the settlement agreement off. Employers will usually pay for solicitors to advise on the terms and effects of the settlement agreement, but no more. The cost of this is around £500 plus VAT. Unfortunately, employers will usually only include an allowance for solicitors which just covers running through the agreement with you and signing it off. If you would like the solicitor to be involved in any negotiations, this will usually cost more. Your solicitor should request a higher contribution from your employer if the circumstances above apply.  Need assistance with a settlement negotiation or the agreement process? Our experienced employment law team is ready to help. Find out more about our no-cost (to you) settlement agreement service .

When an employee signs a settlement agreement, they are giving up the right to bring certain claims in an employment tribunal (and other courts) relating to their employment and its termination. In return, the employer will generally pay a sum of money to compensate them for waiving their legal rights. Standard settlement agreement exclusions While settlement agreements will be tailored for each individual and the circumstances , there are certain standard clauses which are found in the wording. These include carve-outs (exclusions) from the claims the employee is agreeing not to bring. These exclusions are helpful to the employee because they preserve the right to bring certain limited claims against the employer in the future. Standard exclusion clauses include claims in respect of: accrued pension rights latent personal injuries of which the employee is not aware at the time of the settlement breaches of the settlement agreement itself. Other carve-outs are helpful to the employer because they seek to limit the obligations imposed on them by the settlement agreement. These commonly include limits on: the terms of any reference to be provided; the extent of the employer’s obligation to prevent staff from making derogatory comments about the departing employee. Drafting a settlement agreement which works for the employee Generally, the employer will present the employee with a draft settlement agreement which they (or their adviser) has drafted. It will generally start from a position that favours the employer as much as possible. When acting for an employee, we would: review their settlement agreement. seek to negotiate the widest possible favourable exclusions. narrow down, as far as possible, the exclusions which work in the employer’s favour. Providing a reference for future employers These days, fear of litigation means most employers have a policy of only providing a standard reference detailing dates of service and job title , rather than any subjective comment on the quality of the employee’s work. The form of reference is often set out in a schedule to the settlement agreement. It is helpful if the reference letter specifically says that it is in accordance with the employer’s policy on references so no adverse inference is drawn by prospective employers. There should be an express undertaking to provide a reference in this form, upon request. Preventing employees from making derogatory remarks Employers may resist an absolute obligation to prevent staff making derogatory comments about the departing employee. The typical defence is that they cannot police what all their staff may choose to say or write. While an acceptable form of words can usually be found following negotiations, it is important that this obligation is not watered down so far as not to protect the individual at all. Phrasing which employers have been using recently simply states that they will not “encourage or condone” staff in making derogatory comments. We would advise clients that this is not strong enough to incentivise an employer to stop derogatory comments being made. Understanding settlement agreement exclusions Negotiating carve-outs and exclusion clauses in a settlement agreement is complex. Without independent legal advice and knowledge of employment law, it may be easy to agree a settlement offer that contains loopholes favourable to the employer. As specialist employment solicitors, our team at Springhouse is perfectly placed to provide the professional advice you need during settlement discussions, and when signing an agreement.  To begin the process of obtaining the clean break you deserve, and guaranteeing the agreement conditions you need, get in touch today.