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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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    312 Reviews

    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 1 day 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 days ago

    Anonymous

    Very quick and professional service , Rana was very helpful

    Posted 2 days ago

    James G

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

    Posted 4 days ago

    Pravina P

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

    Posted 1 week ago

    Paul L

    Sacha was extremely helpful in my matter. I would not hesitate you use Sacha or Redmonds again. Everyone was very helpful.

    Posted 2 weeks ago

    Monique N

    I had Mel Chin helping me with a settlement and she was very professional and reliable throughout my case. Mel provided me with a good understanding of what was happening and gave suggestions on routes I could take. My case was resolved and closed promptly although the opposing side were very difficult to deal with. A very big thank you to Mel and Chris.

    Posted 2 weeks ago

    Jackie C

    My first ever experience needing the services of a solicitor; cannot speak highly enough of Mel and Chris’s personable, reassuring and straight to the point advice in dealing with my settlement agreement. They put me at ease during an extremely stressful time. I am equally as happy with the outcome, as l am their professional services.

    Posted 2 weeks ago

    ""

    Really happy with the service. All very efficient. Mel rattled through things very fast, however was great whenever I needed to stop and ask a question! Would definitely return to Redmans if I ever needed Legal advice.

    Posted 3 weeks ago

    Peter F

    Very helpful and clear advice, would highly recommend.

    Posted 3 weeks ago

    William A

    Second time I have had to use Redmans. They did not disappoint. They are fast , efficient and friendly. I have already recommended them to friends and colleagues. I hope I dont have to use them again but if I have to , they are the solicitors for me.

    Posted 3 weeks ago

    Fleeta C

    Great service with tantastic communications. The solicitor responsible is extremely knowledgeable and was responsible for bringing a timely and desired solution.

    Posted 3 weeks ago

    Veronica M

    Extremely helpful, starting from a request for advice at very short notice, to dedicating time for me to understand and review all documents thoroughly.

    Posted 3 weeks ago

    Sophie R

    Very efficient and professional service. Chris was very empathetic, knowledgeable and personable. Highly recommended.

    Posted 4 weeks ago

    Melanie M

    Very happy with the detailed advice provided from Redmans. They also helped me to secure a higher settlement than originally offered by my employer and were extremely diligent. I first spoke with Chris at relatively short notice and then Sacha dealt with my case. Would definitely recommend and use again in the future if needed.

    Posted 1 month ago

    Anonymous

    Redmans helped me with a work related issue, which was resolved quickly and professionally. I would definitely recommend this company.

    Posted 1 month ago

    James F

    Great people, really friendly and professional helped with everything that I needed.

    Posted 1 month ago

    Anusha S

    My case was handled by Sacha who was very thorough and helped me to achieve a good outcome with my employer. Sacha was very personal, professional and helped me during quite a stressful time, so I am hugely grateful to her and to Redmans. This was my first time engaging with a law firm so I wasn't sure what to expect but I can definitely say that it was a good experience overall and I ended up better off due to having the help of an experienced and proactive solicitor on my side.

    Posted 1 month ago

    Diane P

    So grateful that I contacted Redmans to deal with my Redundancy Agreement. Everything from the initial call to the completion of the matter was professional, efficient and effective. I was listened to, had everything explained simply and kept informed of every step. I received super advice and the costs were very competitive. I would highly recommend them to anyone seeking similar help. First class service - thank you

    Posted 1 month ago

    Chris L

    It was a very efficient and effective service - Would recommend.

    Posted 1 month ago

    Anonymous

    Exceeded my expectations. Very professional and proactive. I highly recommend them.

    Posted 1 month ago