Redundancy settlement agreements


A redundancy settlement agreement in the UK is a voluntary legal document used when an employee is made redundant. It specifies the termination terms of employment and includes a financial package from the employer in return for the employee’s agreement to waive legal claims related to their redundancy. 


Such agreements can offer benefits exceeding statutory redundancy entitlements, potentially including better compensation and helping to avoid future disputes


A redundancy settlement agreement can also be issued to employees who are accepting voluntary redundancy. This is because employers quite often want to pay an employee in excess of the statutory minimum entitlement without setting a precedent.


To manage redundancy discreetly and avoid setting precedents, employers can offer employees a redundancy settlement agreement. This agreement allows for termination payments that exceed the minimum required by law while keeping the details confidential.


Employers often want to encourage individuals to accept the offer of voluntary redundancy because this makes matters more straightforward for them. It avoids the need to follow a formal redundancy process with those same individuals.


Formal redundancy processes are often more contentious and more likely to lead to claims in the Employment Tribunal.


Redundancy payments


The redundancy payment that an employee can expect to receive when being made redundant by his or her employer is directly related to his or her salary level, length of service and age.


An employee typically receives a redundancy payment related to statutory redundancy which is subject to statutory minimum weekly amounts per year of service together with a payment in lieu of his or her contractual entitlements.


Contractual entitlements include payments of salary up to the date of termination together with payment in lieu of notice. It also includes payment in lieu of any accrued but untaken annual leave.


Individuals being offered a redundancy settlement agreement as part of the process are typically offered this at the outset of the process. This is so that the employer is not required to complete the process. Following the redundancy settlement agreement being signed by all parties, all claims will be waived.


A fair redundancy


In order for a redundancy to be fair, it is necessary for the employer to show that there is a reduced requirement for a particular role at an organisation.


In addition to this, it is necessary for employers to follow a process which is compliant with employment law. This includes the need to consult with the individuals about any ways in which the redundancy may be avoided.


In situations where there are individuals who are carrying out similar roles, there may be a requirement to pool those individuals together. Then, apply a scoring system to various objective criteria in order to determine which individual will be selected for redundancy. 


In addition to this, a consultation needs to be followed with each individual provisionally selected for redundancy. Ways should be sought to avoid the redundancy. This includes the consideration of any suitable alternative positions that may be available.


It is only in a situation where no way can be found to avoid the redundancy, that redundancy may be confirmed. The right of appeal is offered at that stage to employees, should they wish to challenge their redundancy via the internal appeal process.


Unfair Dismissal and the Employment Tribunal


If an employee thinks their redundancy was unfair, they can file an unfair dismissal claim at the Employment Tribunal. This allows them to challenge the fairness of their redundancy procedure.


This claim should be issued within three months of the date of the termination of his or her employment for the reason of redundancy.


Prior to issuing a claim at the Employment Tribunal, the employee should notify ACAS to commence the early conciliation process. Then, they should obtain a certificate which he or she can then inform the Tribunal about when issuing his or her claim.


Redundancy damages


Damages for employees made redundant are based on the actual loss of salary after termination. These recoverable damages correspond to the earnings they miss out on due to redundancy.


If an employee quickly mitigates their losses after dismissal, the potential damages recoverable from an Employment Tribunal for unfair dismissal will decrease accordingly.


Waiving your rights – get advice from a redundancy settlement agreement solicitor


Employees who choose to sign redundancy settlement agreements will have waived their rights to pursue any claims in the Employment Tribunal. That option will then not be available to them. It is also a legal requirement to seek redundancy settlement agreement advice from a qualified redundancy settlement agreement solicitor.


Individuals should inform their adviser if they believe their redundancy process was flawed or not genuine when discussing their settlement agreement. This will ensure that such concerns are considered during negotiations.


It may be the case if there is a procedurally or substantively unfair redundancy, that a redundancy settlement agreement solicitor could negotiate an increase on the sums of money being offered. They would act according to the settlement agreement with the employer’s legal advisers.


Get in touch for help with your redundancy settlement agreement


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