Negotiate a higher redundancy payout – 10 top tips

In this article Chris Hadrill , the partner in the employment team at Redmans, gives his top ten tips on negotiating a higher redundancy payout

  1. Set out your objectives

  2. Check your contract of employment

  3. Check your employer’s redundancy policies

  4. Decide your negotiating strategy

  5. (Almost) always seek to negotiate the financial values

  6. Be clear and polite when negotiating

  7. Take good notes of meetings

  8. Do your research

  9. Talk to colleagues

  10. Talk to a solicitor

Set out your objectives

Think carefully about what you’re looking to achieve from the redundancy payout negotiations – are you looking to maximize the financial payout, get a better reference, or just leave the organisation as soon as possible? These decisions will guide the way in which you approach the negotiations and how aggressively you wish to negotiate the redundancy pay (as well as a variety of other factors). For the purposes of this article I will assume that your main objective in the settlement agreement negotiations is to increase the redundancy payout.

Check your contract of employment

Find a copy of your contract of employment and review it before starting the negotiations over redundancy pay – your contract of employment will almost always contain clauses that will affect the terms of the settlement agreement, including: notice pay clauses, confidentiality clauses, intellectual property clauses, and post-termination restrictions (which may, for example, restrict your ability to join a new business after your employment terminates).

Forewarned is definitely forearmed in these circumstances, as you may wish to address the relevant clauses in the redundancy pay negotiations.

Check your employer’s redundancy payout policies

Check whether your employer operates, or has operated, an enhanced redundancy policy . Obtain a copy of the policy and speak to your (former) colleagues to see how the redundancy policy was operated in these circumstances.

Decide your negotiating strategy

Once you have decided what your objectives in the negotiations are, decide how you are going to approach negotiating your redundancy settlement agreement – generally, you have the following options:

  • Negotiate the agreement yourself; or, if you have instructed a legal adviser to represent you

  • Instruct your legal adviser to negotiate the settlement agreement on your behalf

In deciding which approach to take, consider how good your ‘political’ connections at your employer are, how much leverage you have, and whether you are able to talk direct to the ‘decision maker’ in the process. If so, it may be best for you to negotiate directly with your employer (whilst taking the appropriate legal advice) – an added benefit of this approach is that it will also help to keep your legal costs as low as possible.

Further reading: read our guide on settlement agreements

(Almost) always seek to negotiate the financial values

It is almost always worth seeking to negotiate the financial values of the settlement agreement (particularly if you wish to increase the value of the redundancy payout).

What you will want to think carefully about is what you want to negotiate within the value of the redundancy payout: is it the ex-gratia payment (which can normally be tax-free for employees up to a maximum of £30,000), obtaining a sum in respect of your bonus or commission, or pushing for compensation for giving up rights to equity in the business (for example, losing rights to share options or shares), or to push for all of these payments? It’s important to go into the negotiations with a clear view of the payments you’re seeking (and the value of these payments), as once you’ve started negotiating it will normally be hard to add more demands ‘into the pot’. 

Calculating your statutory redundancy pay

As an additional point, also check the value of the statutory redundancy payment that you are entitled to – you can use the Government calculator to work out the minimum you’re owed for statutory redundancy pay.

The current maximum value for weekly pay (for the purposes of calculating the statutory redundancy pay) is £643. This rate will generally change each year in April (usually increased for inflation).

The maximum total statutory redundancy pay is currently £19,290.

Although there are limits on redundancy pay for the purposes of calculating statutory redundancy, there is no limit to what can be negotiated for enhanced redundancy pay (although there are average amounts that employees can conventionally expect to receive, as detailed below).

Further reading: how to negotiate enhanced redundancy pay

Be clear and polite when negotiating the redundancy payout

This is often an over-looked requirement: be firm in your negotiating stance, but be polite and clear when dealing with the other side (whether it’s you dealing directly with the other side, or your solicitor communicating your instructions).

Grand-standing, tub-thumping, and aggression are hardly ever productive ways of communicating, and to engage in such behaviour will normally push you further away from your objective of increasing the enhanced redundancy payout rather than towards it. It can often be difficult to hold your emotions in check during the negotiating process (as your job is normally a core part of your identity, and losing your job is an emotional process), but try and view the negotiations as a pragmatic business exchange rather than anything else.

Further reading : how to negotiate your settlement agreement package

Take good notes of meetings

This, again, is an oft over-looked strategy: make sure that you’ve got a clear paper-trail recording what happened when, and how – information is, to a great extent, power in negotiations, and memories of events fade quickly.

Keep relevant letters, emails, text messages (and any other written records) stored in an easily-accessible but safe electronic folder (for example, a Dropbox folder), and make sure that you make contemporaneous written notes of any meetings or verbal conversations that take place. You may wish to also consider recording important meetings, but beware: if you do this covertly then this could result in disciplinary action against you (as organisations quite often treat the making of covert recordings as misconduct (and even gross misconduct)).

Do your research

Before you start the negotiations make sure that you understand the factual and legal arguments that you are going to make to negotiate the increase to your redundancy pay: what factual issues are key?; do you adequately understand the law relating to unfair dismissal?; do you adequately understand how your rights during redundancy?; how confident do you feel about your case?; how confident does your solicitor feel about the prospects of your unfair dismissal case and/or the negotiations?

Understanding these issues will be key to you being able to have a grounded understanding of the risks and benefits of negotiating your redundancy payout, and to understanding the options that you have available to you.

Further reading: read our guide on your redundancy rights

Talk to colleagues

Speak to your current/former colleagues about previous redundancy processes, what happened during these processes, what they received in redundancy pay, and their understanding of what happened during the redundancy process/any negotiations – again, information is power and the more you know about how the organisation deals with redundancy processes/redundancy payouts, the better the chance you will have of achieving what you want

Warning: be careful when talking to current/former colleagues about the above, as discussing these matters could be a potential breach of your organisation’s policies, your contract of employment, and/or your settlement agreement (or your former colleagues’ settlement agreements, as applicable).

Talk to a solicitor

It can often help to speak to a solicitor for a number of reasons: they will have experience of dealing with these situations, so they’ll be able to let you know what they would expect to happen, how to address the negotiations, and how much you should expect in redundancy pay.

Equally, they will, if you ask them to, deal with the negotiations with your employer themselves; they may give you more confidence in your position (or, equally, tell you if you’re being over-confident); and your employer will often pay for the cost of the advice if a settlement agreement is subsequently agreed and completed.