Settlement Agreements – an alternative to redundancy?

Uncertainty and a reduction in business is causing many companies to think about their survival.

The CJRS has no doubt given many employers a lifeline and much needed breathing space, however as we continue to work through the crisis many employers are now considering changes to contracts of employment to accommodate reduced hours and ultimately redundancies and layoffs.  For many of these options, the use of settlement agreements is a possibility well worth considering.

A settlement agreement can be used in many circumstances and can be advantageous for both the employer and the employee in bringing about a termination of employment without risk of a tribunal claim.  They can be used when an employment contract is about to end and can replace redundancy procedures if settlement terms can be agreed thereby saving companies both time and money in the long run.

A settlement agreement secures financial compensation for the employee which is often tax efficient and can include other terms such as an agreed reference, and an agreed announcement.  Most importantly, settlement agreements are legally binding and achieve closure on an employee dispute very quickly and often without weeks of preparation, consultations and stress.

It is important that the employer ensures the terms of the agreement are tailored for the individual circumstances and the agreement complies with the legal requirements which will ultimately prevent the employee from making any future claims against the company.

The individual is required to seek independent legal advice on the terms and effect of the agreement and must sign an advisers certificate to confirm that advice has been given.  The employer usually makes a contribution towards the cost of the employee obtaining advice on the terms of the agreement.

A mutually beneficial settlement agreement can therefore be achieved very quickly, with ACAS guidelines suggesting a period of 10 days for an employee to seek advice and consider the terms although it can be less than this.  The signed settlement agreement provides the security of a full and final settlement and waives the employee’s right to pursue any employment related claims against their employer.

We have been regularly drafting agreements for employers and advising employees on individual agreements throughout the pandemic.  To adhere to social distancing guidelines we can provide consultations by phone or video call if required.  To discuss the provision of or advice upon a settlement agreement please contact Sarah Collier  on 01204 527777 or 01254 268790.