Top tips for employers on settlement agreements
In the last year many businesses have struggled to cope with turbulent economic conditions and a rapidly-changing legal and economic environment. One option for dealing with these circumstances is downsizing your workforce or restructuring your business. If you’re looking to make a number of employees redundant then you may wish to consider settlement agreements for your employees: they’re an efficient, clear and amicable way of terminating the employment relationship with an employee, and in return you will have the certainty that the relevant employees will be waiving their right to bring employment-related claims against you.
We have provided below our top tips for employers on how to deal with a group settlement agreement process
Why do I need to get my employees to take independent legal advice on their settlement agreements?
If you’re undertaking a group redundancy exercise (or dismissing a group of employees for any other reason) then you may wish to consider offering the relevant employees a settlement agreement. If you’re offering employees settlement agreements then you will need to make sure that the employees are receiving independent legal advice (in addition to other requirements) to ensure that the settlement agreements are valid.
Do I need to cover the cost of my employees receiving advice on their settlement agreements?
It is not legally required but it is usual for the employer to make a contribution to the employee’s legal fees, since one of the statutory conditions for a settlement agreement is that the employee has received legal advice. The going rate may vary depending on locality and complexity, although most are approx. £500 plus VAT.
What approach should I follow if a number of employees in my business are receiving settlement agreements?
If a number of employees (usually five or more) are seeking advice from an independent legal adviser on their settlement agreements then we would normally recommend running a group exercise to deal with the settlement agreements.
Our employment law team has a huge amount of experience dealing with settlement agreements, providing independent legal advice to both employers and employees. We have managed a number of large volume settlement agreement exercises in time-critical situations and we have a record of dealing with settlement agreements professionally and expediently.
If you’re undertaking a settlement agreement group exercise then we would recommend undertaking the following steps to make the process as painless and efficient as possible:
- Digitise the process: use emails, word documents and pdfs to distribute documents electronically – doing this will reduce the amount of time that it will take to complete the process and will allow a clear audit process as to which documents were sent and when
- Use electronic signatures: using electronic signatures has a number of advantages: it makes the process of completing the settlement agreement much swifter, allows for an audit trail of the agreement, and generally allows the settlement agreement to be completed the same day as the terms are agreed
- Set timeframes for the work being done: be clear about your expectations as to when employees should take advice and send their settlement agreements back. As with any project management exercise its a good idea to set clear guidelines as to what work has to be done and when
- Agree a template settlement agreement: agree a template of the settlement agreement internally and pre-approve what standard amendments can (and can’t) be made to the agreement – this will avoid disparities in the completed settlement agreements and allow your team to have a clear understanding of what amendments might be allowed and what won’t
- Give your employees a reasonable amount of time to receive advice on the agreement: under the ACAS Code of Practice on Settlement Agreements employees should have up to ten working days to receive legal advice on their settlement agreements – it’s normally good practice to follow these guidelines (even if they’re not legally binding) to avoid an argument at a later date that the settlement agreements are not binding
- Provide breakdowns of terms to the employee and their solicitor: be clear from the start on what is being offered and why – this will save time on clarifying points in the future
- Be firm on legal fees: be clear on how much is being offered in terms of legal fee coverage to the employees – this will set clear expectations for each employee on what their relevant budget is, and will avoid an escalation in the budget set for dealing with the settlement agreement process
- Use telephone conferences and online meetings: use telephone conferences and virtual meetings (as well as email communications) to ensure that regular updates are given and received on each settlement agreement
- Prepare in advance: as in any legal exercise, planning and preparation are key to achieving a desired outcome. The more work that you can do in advance, the fewer problems you will experience in the process – fail to prepare, prepare to fail
Our specialist team of employment law solicitors can help you deal with your settlement agreement issues. If you’re preparing to go through a group settlement agreement exercise then call one of our legal advisers in order to ensure that your employees are getting the independent legal advice on their settlement agreements. We can also help you with drafting the template settlement agreement to use for your employees. Just call us on 020 3397 3601 or use our enquiry form and we’ll call you back.