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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).

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    Testimonials

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    330 Reviews

    Arabella B

    I am so grateful to Caroline Lewis at Redmans Solicitor’s for helping me with my Unfair Dismissal Case. I was seriously impressed how easy Redmans made the whole case, and am very happy with my Settlement. I have recommended your firm to at least 5 people in the last 3 months.. Thank you Caroline and everyone at Redmans. You are Brilliant .

    Posted 7 hours ago

    Anonymous

    Highly professional and efficient service.

    Posted 12 hours ago

    Tanya T

    I had the pleasure of Chris and Sacha’s experience with a work matter. They made me feel at ease with the process and explained everything thoroughly. Would happily recommend Redmans especially Chris and use them if needed I’m the future. Thank you!

    Posted 13 hours ago

    Anonymous

    I used the services of Redmans solicitors and was a quick outstanding service I engaged them in a settlement agreement after been made redundant extremely professional at all that was done and would definetly use them again

    Posted 14 hours ago

    Adrian A

    Spot on support, enough to get the matter at hand sorted. No beating around the bush, no nonsense - got the job done and we all moved on.

    Posted 14 hours ago

    Mark Q

    Five Stars I was most impressed by the attention, courtesy, speed and above all, professionalism in dealing with my Settlement Agreement. I would certainly have no problem in recommending this firm to anyone in need of their services.

    Posted 1 week ago

    Ade A

    I was surprisingly impressed by how Redmans Solicitors handle my case. From the moment I call them to the absolute end of my case, they always look after my best interest.

    Posted 1 week ago

    Malcolm P

    they were there when others were not

    Posted 2 weeks ago

    Anonymous

    Excellent service all the way through from start to finish. Really great support and guidance from the team, they secured the offer that I wanted. I can't recommend Redmans highly enough and will be sure to use their services again should the need arise.

    Posted 2 weeks ago

    Anonymous

    Efficient and quick service!

    Posted 1 month ago

    Karen B

    Quick response very helpful Issue raised dealt with very quickly

    Posted 1 month ago

    Carmen T

    Redmans give Great service and advice on reading contracts. They can explain all the solicitors jargon into words that you can understand. I received excellent service an I will use them again and again.

    Posted 1 month ago

    Anonymous

    Very grateful for Mel’s efforts in handling my case from start to finish which I would have found very stressful without it. She was very professional, friendly and we had a positive outcome. Highly recommend.

    Posted 1 month ago

    Nalin W

    Mel Chin was my Legal Executive when I engaged the services of Redmans Solicitors to help with a redundancy matter. She was incredibly approachable and professional from start to finish. Specially I have to mention regarding prompt reply to all my email queries, It was super quick. I would thoroughly recommend Mel Chin. Many Thanks

    Posted 2 months ago

    Anonymous

    I'd highly recommend Redmans Solicitors. Mel was very helpful and assisted me throughout my case.

    Posted 2 months ago

    Anonymous

    Sacha was very thorough and very helpful, with great advice on when to act and when to wait on my case.

    Posted 2 months ago

    Anonymous

    I have been very pleased with the support I got from Redmans Solicitors on my case with my employer. Caroline has always helped me to put things in perspective and showed me different scenarios ultimately to help me taking the right decision. She was very professional and always available when I needed, and at the same time also emphatic which I found also really important to establish a strong relationship. Will definitely recommend!

    Posted 2 months ago

    Anonymous

    Prompt and efficient response to my enquiries. Excellent negotiating skills with my employer which considerably improved the terms of my settlement agreement.

    Posted 2 months ago

    Anonymous

    Very quick and professional service , Rana was very helpful

    Posted 2 months ago

    James G

    Very professional, knowledgeable and kept me informed at every stage of my case. I would highly recommend Redmans.

    Posted 2 months ago

    Pravina P

    Chris was really good and help solve my issues with current company. I would recommend him to anyone.

    Posted 3 months ago