Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Chris Hadrill, a specialist employment solicitor at Redmans, answers the question:

“Settlement agreements in redundancy situations – what are they used for?

What is a settlement agreement?

Settlement agreements are, generally, a written agreement to provide an employee (or worker) with benefits (e.g. a payment of compensation, a reference, sometimes an apology) in return for the employee’s agreement that they will waive their right to bring such claims, or withdraw them if they have already issued a claim. See this post for a more in-depth analysis of what a settlement agreement is.

Settlement agreements in redundancy situations – why use them?

In my experience, employers use settlement agreements for a variety of reasons, including (but not limited to):

  1. To limit the employer’s risk of claims being brought against it
  2. As part of an employer’s cultural workplace practice
  3. To set out in clear and precise terms what each party’s obligations are upon termination of employment
  4. To ensure an amicable end to the employment relationship

These reasons are analysed below

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.

As can be seen from the above, there can be many reasons for the offer of a settlement agreement. in a redundancy situation. If you’d like to discuss your settlement agreement with one of our solicitors please call 020 3397 3603 for a no-obligation chat (we offer a free initial consultation).

About

Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees Call 020 3397 3603 to speak to one of the members of our employment team or email us on enquiries@redmans.co.uk. Redmans have offices in Richmond, Chiswick, Hammersmith, Fulham, Kingston, Wimbledon, Ealing, Kings Cross and Marylebone (meetings strictly by appointment only).

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

Your name

Your email

Your telephone number

Contact us

Please feel free to discuss your own position and concerns. Contact your nearest office on:

T: 020 3397 3603
E: enquiries@redmans.co.uk
W: www.redmans.co.uk

Testimonials

4.72 Average

88 Reviews

Anonymous

Responsive, patient, thorough and personable - an excellent service.

Posted 1 day ago

Anonymous

The team at Redmans, Chris Hadrill and Sacha Barrett were always very helpful and had expert knowledge to assist me during my employment law matter, I would not hesitate to recommend them to all!

Posted 2 days ago

Arun T

Chris was punctual, attentive and accurate. He answered my questions with clarity and avoided dubiosity. I would recommend him to anyone seeking legal advice within his remit.

Posted 3 days ago

Yulian Z

Great service

Posted 3 days ago

Anonymous

Excellent, professional service and a speedy resolution. Many thanks

Posted 3 days ago

Taral P

Sacha and Chris were both very helpful in closing out my matter. Sacha was very clear in helping me understanding the documents I needed reviewing, providing a professional service throughout.

Posted 3 days ago

Anonymous

Really pleased with the swift and professional service from Redmans. They provided very clear advice and helped conclude my matter with the minimum of stress or delay.

Posted 3 days ago

Matthew L

Redmans were very quick to respond to my initial enquiry, and provided me with a very effective and efficient service, generating a most satisfactory outcome. I would definitely use them again if the need arose.

Posted 3 days ago

Anonymous

First rate service. Warm and friendly whilst exceptionally efficient at the same time. I would highly recommend them.

Posted 3 days ago

Anonymous

Professional and helpful. Thorough and supportive.

Posted 3 days ago

Richard A

Excellent service, prompt replies, great advice

Posted 4 days ago

Anonymous

Very professional services

Posted 4 days ago

Margaret

Redmans Solicitors took a lot of the worry away and were very thoughtful and meticulous in their dealings with my case , thank you very mush , great service and a great job

Posted 1 month ago

Mark B

Prompt efficient service. Hourly, and part thereof, billing got a bit stressful at times - as opposed to flat fee - made me think twice about sending an email or making a quick call when I had a query because it would have eaten up minutes from my budget. But happy with the legal service I received overall and would recommend.

Posted 1 month ago

Anonymous

Chris Hadrill has provided a truly wonderful service and was willing to lend his support and expertise at a time when other solicitors, only wanted to discuss their fees! A clear thinking and down to earth professional, Chris can be trusted to listen carefully to your matter, cut through the fog, and advise you on the best (and most realistic) way forward, saving you time, money and heartache. It will be helpful if you first get your ducks in a row in terms of documents / evidence etc. and then contact Chris, (that’s what we did) as this will help your matter to be dealt with faster. The more organised and together you are the more successful you will be. You'll be fine with Chris, I highly recommend him. Good luck!

Posted 1 month ago

Richard v

Excellent Service

Posted 1 month ago

Anonymous

Very happy from service received. Highly recommend

Posted 1 month ago

Colin W

Very professional and thorough. Sachs who dealt with the bulk of my case was excellent Thank you. .

Posted 1 month ago

Anonymous

I was generally impressed with the fast turn around, efficiency, responsiveness, and consideration of circumstances. I needed a couple of areas of advice quickly and with Redmans help was able to get to a conclusion quickly and with minimum stress. They were friendly and professional throughout - I'd use them again.

Posted 1 month ago

Anonymous

The guidance and assistance I recently received when using Redman's was fantastic. Caroline & Chris were both very informative and understanding walking me through each step. Thank you.

Posted 2 months ago

Nicola W

Fantastic service, very quick and efficient. Thank you

Posted 2 months ago