The aim of the furlough scheme was to avoid redundancies, however, since the scheme has now ended, many employers will now not be able to avoid these redundancies any longer. Some employers will offer employees a settlement agreement as an alternative to being made redundant or going through the redundancy process.
What is a settlement agreement?
Settlement agreements – formerly known as compromise agreements – are used to deal with exits that occur for a number of reasons, including redundancies, ill health, performance issues, conduct and more.
For the employer, they guarantee that no claims will be brought by the employee, and for the employee, they deliver a guaranteed result that often includes a tax-free compensation payment, lump sum payment of notice pay and an agreed reference for prospective new employers.
The terms of a settlement agreement are legally binding once they are signed, and will normally provide for:
- Any payments that are to be made to the employee upon the termination of employment e.g. redundancy pay, notice pay and compensation
- Outstanding benefits owed to the employee, such as salary and holiday pay
- A confidentiality or non-disclosure clause
- A job reference that will help the employee find employment elsewhere
- A contribution towards the legal costs incurred by the employee
As the terms of a settlement agreement can have significant implications for the parties involved, it is a legal requirement for employees to seek independent legal advice prior to signing one.
Employers will almost always make a financial contribution towards the cost of you taking legal advice or pay for the entire fee. Settlement agreements that are signed without the employee having done so are not legally binding and cannot be enforced for that reason.
Should I accept the settlement or follow the process?
Usually, if a settlement agreement is being offered to an employee, then there will be an incentive for them to do so, for example an enhancement on any statutory redundancy pay owed in the form of a termination, compensation or ex-gratia payment.
If you are unsure as to how much redundancy pay you would be entitled to, you can calculate that on the government website, here, https://www.gov.uk/calculate-your-redundancy-pay.
By following the process with the employer, an employee may find an alternative to redundancy such as an alternative role within the company. If not, an employee is entitled to statutory redundancy pay (if they meet the relevant requirements), notice pay and payment for any accrued but untaken annual leave.
Smith Partnership’s employment lawyers can review your settlement agreement with you and very often help to negotiate much more favourable terms.
From securing extra compensation to obtaining the most favourable terms of leaving your employment, we are commercial and pragmatic negotiators who do not like to see employees being short-changed. For this reason, we will fight your corner to ensure the final agreement is in your best interests.
What are the Legal Costs?
Given the fact that settlement agreements require the employee to speak to a legal expert in order to be valid, employees will often be concerned with the legal costs associated with taking the advice. Taking a client-focused approach throughout the process, our employment law solicitors do everything in their power to minimise any costs incurred on the employee’s part.
We always aim to keep legal costs within the boundaries set by your employer’s contribution. In cases where this isn’t possible, we will seek to negotiate an increase in the contribution made on the part of your employer.
How do you obtain legal advice on your settlement agreement whilst social distancing, isolating or if you do not feel comfortable attending an office for a face to face meeting?
Legal advice has to be sought on settlement agreements before it is legally binding. However, all our advice on the terms and effects of you entering the settlement agreement can be given over the phone and the document can be finalised electronically. We can complete the whole process without you needing to attend any of our offices or even leave your home.
The specific objectives of settlement agreement negotiations may vary from person to person. For example, you may want to secure higher settlement payments or want to be released from post-termination restrictions (restrictive covenants). Drawing on our extensive experience, we work with you to establish your ideal outcome and advise on the appropriate strategy for achieving it.
More often than not, we will raise points for negotiation that have never been considered by our clients. Having acted for employees with regards to thousands of settlement agreements over the years, we can deliver a better deal in the vast majority of cases.
Contact Our Team Today
To find out how our expert team of solicitors can help you, contact us today on 0330 123 1229, send us an email via firstname.lastname@example.org or complete our contact form.