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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

    4.79 Average

    273 Reviews

    Mark M

    I found Redmans very easy to work with. Mel was very responsive, her advice led to an improved settlement. . Recommended.!

    Posted 1 day ago

    Anonymous

    Fantastic service. I would recommend Redmans to anyone who needed a Solicitor. The communication was second to none and consistent clear guidance was given.

    Posted 3 days ago

    Anonymous

    Everyone I dealt with at Redmans were professional, empathetic & always responded promptly and helped make the transition as smooth & efficient as possible for me. If you need legal advice, don’t hesitate & contact the team.

    Posted 5 days ago

    Anonymous

    Sacha was incredibly helpful and professional. Timely and accurate advice at a time I most needed it. I was extremely impressed and grateful.

    Posted 5 days ago

    Sue W

    The people at Redmans talk to you with respect and make you feel like they take your situation personal. They clearly care and are extremely professional. I have recommended Redmans to many people.

    Posted 3 weeks ago

    Anonymous

    Redmans Solicitors were consistently prompt, efficient and professional from the start of my reaching out to them for support in relation to contentious negotiations of an employment matter that continued for almost two months resulting in a positive settlement agreement. Chris Hadrill was diligent, thorough, empathetic and objective in his advice and guidance, showing deep and broad knowledge of the law and legal processes plus extensive practical experience in handling complex matters, resulting in clear and pragmatic advice in ambiguous circumstances that resulted in a very good outcome. I fully recommend Chris Hadrill and Redmans Solicitors! I have made this review anonymous purely because of the confidentiality obligations in the settlement agreement concluded.

    Posted 1 month ago

    Michelle W

    Redmans solicitors provided legal support and advice for a settlement agreement. Excellent customer service, very professional. The senior associate solicitor kept me updated throughout the process, showed empathy and the agreement was signed-off / completed within the agreed timeline.

    Posted 1 month ago

    Mark W

    Redmans Solicitors were extremely professional and helpful! Chris Hadrill handled my case and was an amazing help! His guidance, advice and understanding to my redundancy settlement were always clear, concise and very helpful and I am very grateful to him, and glad I found Redmans to help with my settlement. I highly recommend them!

    Posted 1 month ago

    Alison M

    Very happy with the advice I received

    Posted 2 months ago

    Margaret A

    I found everything about the company to be extremely professional and efficient. During my initial contact with Chris, he listened well and was reassuring, so I felt confident that my case would be well handled. Caroline was excellent at explaining all the legal points and answering my questions, as well as being very supportive and understanding throughout the process. I would definitely recommend this company.

    Posted 2 months ago

    Sanja K

    Very efficient and professional service.

    Posted 2 months ago

    Anonymous

    I found the advice I was given by Redmans Solicitors to be clear and useful and found the solicitor on my case to be both knowledgeable and approachable.

    Posted 2 months ago

    Karen T

    Great service. Thank you.

    Posted 2 months ago

    Anonymous

    Excellent service from Chris & Mel Chin. The best outcome was achieved from the redundancy process. They were extremely thorough, listened carefully and acted swiftly on my behalf. I highly recommend Redmans Solicitors

    Posted 2 months ago

    Shanine M

    Excellent service, thank you so much!

    Posted 2 months ago

    Anonymous

    I found Caroline and Chris very Helpful and provided excellent service. Caroline especially provided great legal advice and made me feel at ease with the whole process. I would highly recommend them. Thank you!

    Posted 2 months ago

    Gayle B

    Excellent company very professional would definitely recommend

    Posted 2 months ago

    Alex K

    Redmans provided an excellent service, timely and effective. Will definitely recommend.

    Posted 2 months ago

    Anonymous

    Great job done on my employment law

    Posted 2 months ago

    Dominica S

    Caroline & Chris were very prompt and efficient.Very happy with the service and will definitely recommend Redmans Solicitor to everyone !

    Posted 2 months ago

    Sandra K

    If you are looking for a group of solicitors who are Professional, Caring and on point, then look no futher than Redmans. I was literally hand held through out my case. Can not find fault with this company, very happy with the result and the service i received. Would highly recommend Redmans.

    Posted 2 months ago