Your redundancy settlement agreement – 10 top tips for employees
In this article Chris Hadrill, a specialist employment solicitor in the employment team at Redmans, gives his ten top tips for employees on how to deal with a redundancy settlement agreement
- Challenge your employer on any unfairness in the redundancy process
- Keep good notes of the process
- Make sure your employer checks whether there are any suitable alternative vacancies
- Do your research on the law on redundancy
- Think about whether you want to fight the redundancy
- Get clear details of the redundancy settlement agreement that you are being offered
- Make sure that you’re being paid at least the bare minimum for your redundancy
- Check to see whether your employer has any enhanced redundancy pay policies
- Check what you’re being offered for your redundancy settlement agreement compared to previous employees
- Check the terms of the redundancy settlement agreement carefully
Challenge your employer on any unfairness in the redundancy process
One of the most important things that you can do in a redundancy process is, if you think that you are being treated unfairly, challenge your employer on the points of unfairness – if you challenge your employer then your employer might decide to reverse its decision on the redundancy process or it might decide to offer you a redundancy settlement agreement to compensate you for any points of unfairness.
We recommend that, if you do challenge your employer during the redundancy process, that you do so in writing in order to keep a written record of what happened and when. This will help you to negotiate a settlement at a later date, if necessary, and will also help in any Employment Tribunal claim that you might bring.
Keep good notes of the process
As above, it’s a good idea to keep as comprehensive a written record as possible of the redundancy process. This would include:
- Keeping notes of any meetings that you have with your employer regarding the redundancy process
- Sending emails confirming the contents of any verbal conversations that you have had with your colleagues regarding the redundancy process
- Keeping copies of emails, text messages etc. sent regarding the redundancy process
- Keeping copies of any letters received from your employer regarding the redundancy process
Make sure your employer checks whether there are any suitable alternative vacancies
Your employer has a legal obligation to check whether there are any suitable alternative vacancies in the organisation prior to dismissing you and, if there are any suitable alternative vacancies, to offer them to you (or to give you an opportunity to apply for such).
If you are on maternity leave then you have an enhanced right to be placed into any suitable alternative vacant position in the organisation.
If your employer fails to comply with this obligation then any dismissal may be unfair, and it may be a point that you can use to negotiate your redundancy settlement agreement.
Do your research on the law on redundancy
Make sure that you do your research on redundancy law so that you’re in a position to properly contest your redundancy situation: if you fail to prepare, then you prepare to fail. If you don’t do your research you won’t be able to identify any areas of unfairness in the redundancy process, you will not have a reasonable idea of what your claim might be worth, and your employer might not take you seriously.
Employers use settlement agreements in redundancy situations for a variety of reasons, including:
- To limit the employer’s risk of claims being brought against it – in redundancy situations an employer may be making multiple redundancies as part of a workplace restructuring exercise or in an effort to cut costs. Employers are normally aware, in these circumstances, that disgruntled ex-employees may seek to bring claims against it in the Employment Tribunal (for example, for unfair dismissal) if they feel that they have been unfairly treated, and that there is a risk that the employer may lose such a claim; equally, employers generally wish to avoid Employment Tribunal litigation if they can because it can be a time-consuming process which saps management time and can be expensive due to legal fees. What employers do, therefore, to limit these risks is offer departing employees settlement agreements under which the employee will received an ex-gratia financial package (or some other tangible benefit) and in return the employee will agree to waive his or her right to bring a claim in the Employment Tribunal upon termination of their employment.
- As part of an employer’s cultural workplace practice – some employers offer settlement agreements even if they don’t think that they’re at risk of a successful claim being brought against them – the offer of a settlement agreement is often treated as a standard administrative exercise upon termination (for example, a redundancy situation) which is intended to implement best practice in the workplace.
- To set out in clear and precise terms what each party’s obligations are upon termination of employment – settlement agreements can be extremely useful as a means of clearly delineating the rights and responsibilities of each party (generally the employee and employer) upon termination of employment in redundancy situations: for example, a settlement agreement may remind the employee of post-termination restrictions that they may be subject to under their contract of employment or, alternatively, commit the employer to provide a reference. Setting down in contractual terms the rights and responsibilities of each party leaves less room for a dispute over what was/was not agreed between the parties and allows for a ‘clean cut’ of the employment relationship once the redundancy takes effect.
- To ensure an amicable end to the employment relationship – some employers offer settlement agreements as a matter of goodwill upon termination of employment, and in order to ensure that their departing employees are ‘taken care of’ post-termination.
Further reading: our guide on redundancy in the workplace
Think about whether you want to fight the redundancy
When you’re first informed that you might be made redundant it can be shocking: you might feel angry or used. However, it is important to try and remain objective when considering your options, as if you make a decision when under stress there is a reasonable possibility that it could be a bad decision, based on faulty reason.
If you’re being made redundant there are generally the following options as to how the redundancy will be dealt with:
- Your employer will follow through with the redundancy process and make you redundant
- Your employer will follow through with the redundancy process but decide not to make your redundant
- Your employer might pre-empt the outcome of the redundancy process and offer you a redundancy settlement agreement
If you are at an early stage in the redundancy process then approach your employer to ask to have a without prejudice conversation (a conversation in which you can discuss the possibility of a settlement agreement and its possible terms). Equally, your employer might approach you to have a protected conversation (also known as a section 111a conversation) and put forward the redundancy package that they’re prepared to offer you.
When you’re considering which option you wish to take you will want to think about the advantages and disadvantages of each particular course of action. For example, if you’re made redundant then the advantage of this is that you are then free to bring a claim for unfair dismissal in the Employment Tribunal (should you qualify to make such a claim), but the disadvantages are that this can be a time-consuming process, lengthy, stressful, and costly. Generally, if you can agree a settlement package with your employer then it’s better to sign a redundancy settlement agreement than to litigate in the Employment Tribunal (this is, of course, a general statement and what is appropriate in your particular circumstances will depend upon the context of your matter).
Get clear details of the terms of the redundancy settlement agreement
If you are offered an redundancy settlement agreement by your employer then it’s important to obtain a clear understanding of the breakdown of what you are being offered. You should therefore ask your employer to put details of what it is offering you in writing and, further, for them to break down exactly what you’re being offered (and which parts of the offer will be tax-free and which will not).
As a guide, you should normally receive the following sums as part of an enhanced redundancy package:
- Notice pay
- Holiday pay
- Salary accrued to the termination date
- Benefits to the termination date
- Ex-gratia compensation for the termination of your employment (which can be paid tax-free to you)
The above list is not exhaustive, but it contains the normal types of sums that you can expect to receive if you are made redundant. However, you may also be entitled to other sums (such as commission, bonus, benefits etc.).
Once you have agreed the redundancy package with your employer they will normally provide you with a contract known as a ‘settlement agreement‘ – this contract will set out the sums that you can expect to receive and, normally, a clause confirming that you are agreeing to waive any claims that you would otherwise have against your employer.
Make sure that you’re being paid at least the bare minimum for your redundancy
If you’re made redundant by your employer then the bare minimum that you’re entitled to be paid is as follows:
- Your salary and benefits to the termination date of your employment
- Any contractual sums that you are owed and have not been paid (such as, for example, bonus or commission payments)
- Your notice pay
- Your statutory redundancy payment
You can use the Government calculator to check what payment you should receive in respect of statutory redundancy pay.
Check to see whether your employer has any enhanced redundancy pay policies
Once you have been informed that you are at risk of redundancy check with your employer to see whether they have any enhanced redundancy pay policies (and, equally, any policies which set down the form of the redundancy process that your employer should follow). If your employer does have these policies then check them carefully to see what your rights are and whether your employer is complying with these policies.
If you identify any inconsistencies between your employer’s policies and the redundancy process that your employer is following then raise this with them in writing. This can help to strengthen your hand with regards to your redundancy settlement agreement negotiations, or your Employment Tribunal claim.
Check what you’re being offered for your redundancy settlement agreement compared to previous employees
Ask previous colleagues who have been made redundant what payments they received when they were made redundant – if you can identify a common practice applied to employees in previous situations, but this is not being applied to you, then you may be able to argue that your employer is breaching its own redundancy policies. Equally, if you are being paid a similar amount to what previous employees then this can be useful guiding factor in terms of whether you wish to accept the terms of the redundancy settlement agreement that you’ve been offered.
A word of warning with this approach: if your previous colleagues have signed redundancy settlement agreement terms when leaving their employment they might be bound by a confidentiality clause, and they might therefore not be able to tell you about their situation. Always check this with your colleagues to make sure that you don’t unintentionally breach the terms of their settlement agreement!
Check the terms of the redundancy settlement agreement carefully
Once you’re provided with a copy of the redundancy settlement agreement check through it carefully to ensure that it includes the normal terms that you should expect. If it doesn’t include the standard terms then go back to your employer to negotiate, as appropriate.
Get advice from a specialist employment solicitor on the redundancy settlement agreement terms
A specialist employment solicitor will be able to offer you expert advice on the redundancy process and any redundancy settlement agreement offered – they will, in particular, be able to advise you on the prospects of success of any claim for unfair dismissal that you may have and the value of your potential claim for unfair dismissal.
You are required, if you are offered a redundancy settlement agreement, to take legal advice from an independent legal adviser.