Settlement Agreements can be used to streamline the redundancy process. If drafted properly, the agreement can be highly beneficial for both the employer and the employee.
The use of Settlement Agreements during redundancy
In England and Wales, employers must take certain steps when making an employee redundant. For example, there must be a fair selection process and a consultation period. If an employer does not follow the correct protocol, the redundancy could be considered unfair. This could give rise to an unfair dismissal claim.
Because of the risks involved, employers often make use of Settlement Agreements during the redundancy process. This is a legally binding contract, in which the employee gives up their right to bring legal action against the employer. This allows the employer to terminate the employee’s contract, safe in the knowledge that an unfair dismissal claim cannot be made.
In return, employees are usually awarded a lump sum of money. The exact figure is up for negotiation, but the employee may find it is more generous than their statutory redundancy pay. An employer may also provide a reference, the wording of which can be agreed by the parties.
Therefore, Settlement Agreements can be a win-win situation for everyone involved. The employer reduces their workforce and protects themselves from the threat of legal action. The employee receives a severance package and avoids the long-winded process of being made redundant.
Negotiating a Settlement Agreement
However, a Settlement Agreement is only beneficial for an employee if a fair deal is struck. In some situations, the employee could actually receive a greater sum of money by pursuing the redundancy process, or by taking a claim to the Employment Tribunal. That is why legal advice is essential.
In fact, to protect employees, the law stipulates that they must get independent legal advice before signing a Settlement Agreement. That way, a solicitor can explain the implications of entering into the contract and, if necessary, help to negotiate a better deal.
Independent legal advice
If your employer plans to make you redundant and has offered you a Settlement Agreement, please contact us at Breens Solicitors. You have to get independent legal advice before proceeding, or the agreement is not considered valid and cannot be upheld. Because of this, your employer will likely pay for you to speak to our solicitors.
We can explain what the Settlement Agreement means for you, and whether the deal should be restructured (or re-negotiated) to better protect your interests. We can also answer any other questions you might have, ensuring you know the options available to you.
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