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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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Anonymous

Excellent service, compassionate and a good outcome

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Anonymous

I had an employment issue which required legal advice. Chris was very supportive and knowledgeable, resulting in an optimum resolution in my favour. Would definitely recommend.

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David M

Very professional and first-rate advice. I would use again. With thanks,

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Anonymous

Got the job done swiftly without going too much in to detail.

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Derek W

Redmans dealt with my case very efficiently and I was happy with the outcome.

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Anonymous

Timely professional advice!

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Anonymous

Very good service

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Anonymous

I was in contact with Chris and then worked with Caroline on an employment matter. I was very pleased with the service and professionalism throughout, and came away with satisfied with the outcome. Would happily recommend.

Posted 2 weeks ago

Nikki

Received advice re employment law. Chris was very helpful and advised accordingly. Would happily recommend them and if ever I need help again, will not think twice before using them.

Posted 3 weeks ago

Samantha K

Absolutely brilliant thank you. Caroline Lewis is a legend

Posted 2 months ago

Anonymous

The legal advice was clear and helpful.

Posted 2 months ago

Davinder P

Good Service

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Adrian V

I was using Redmans services for a Settlement Agreement. Very quick and professional service. The outcome was favourable and I was very pleased with the amendments and results. Pretty glad to recommend them for any type of legal advice.

Posted 2 months ago

Anonymous

Very responsive, efficient, clear and supportive. Thank you! Highly recommend.

Posted 2 months ago

Tiago S

Chris was always prompt to help me with legal matters that are beyond my comprehension and very helpful leasing with my former employer. I would recommend Redmans Solicitors to everyone who needs help.

Posted 2 months ago

Anonymous

Fast and professional advice tailored to what was needed. Thanks for your help Chris Hadrill and team.

Posted 2 months ago

Peter S

Really pleased with the outcome and the advice I had from Chris and Sacha.

Posted 2 months ago

Harika A

Redmans solicitor's helped me with my settlement agreement, Chris has been very helpful throughout the process.He was very prompt in his responses and made my settlement look simple.Special thanks to Caroline for her efficient communication, thorough explaination of contract terminology and negotiations.I highly reccommend Redmans solicitors for anyone seeking employment related legal help.

Posted 2 months ago

Anonymous

Good and quick service

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Ricky D

Very satisfying to be assured of such attention and professionalism.

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Anonymous

Excellent service - thankyou

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