It is a terrifying word, and we have all heard it far too often this year.
The good news is that armed with the knowledge of your rights and responsibilities, it is possible to make this a reasonably painless process.
It is important to note that you only have redundancy rights if you are legally classed as an employee and if you have worked for your employer for more than two years.
Employers who follow a proper consultation process and decide the redundancy is fair may decide to dismiss you simply with statutory redundancy pay based on your age and length of service. You may qualify for a more generous company redundancy package, details of which will be laid out in your contract.
If you are not working your notice period, you should also receive
a payment in lieu of notice at your full rate of pay, even if you are on furlough. The minimum notice is one week for every complete year of service, capped at 12 weeks. You should also receive a payment for any untaken accrued holiday leave.
Many employers choose to offer a settlement agreement with an enhanced redundancy payment in order to ensure the employee makes a smooth exit from the business, and also to protect themselves against any future claims.
Emma’s Top Tip: Try to write down everything throughout the process and remember not to rush into making decisions. Make sure you take the opportunity to ask as many questions as you can and keep a note of every conversation.
What is a settlement agreement?
A settlement agreement is a contract between you and your employer that outlines the incentives (usually financial compensation), being offered to you in return for your agreement not to pursue any claims in a court or an employment tribunal.
Why do I need a solicitor?
It is a legal requirement that a settlement agreement must be signed off by a solicitor, a certified trade union or recognised adviser. This is to ensure you understand the terms before you agree to waive your employment rights.
Is the amount of money offered by your employer fair?
A good employment solicitor can help advise if you are getting a good deal. They will be able to identify if you have any grounds for a claim against your employer such as discrimination or unfair dismissal.
What are the usual payments?
Compensation for loss of office
A payment of up to £30,000 compensation can be paid tax free if it is
a compensatory rather than contractual payment, known as an ex-gratia payment.
If you are being paid in lieu of notice, this will be covered within the settlement agreement. This will be subject to tax.
Untaken accrued holiday leave
A payment for any accrued, but untaken holiday.
Bonus and commission
A solicitor should check your contract to make sure that all contractual bonuses and commissions are paid in full.
Unless your contract says otherwise, pension contributions should continue for the length of your notice period. Your solicitor will need to advise you in relation to ongoing loss of pension, particularly if you have a final salary pension.
Emma’s Top Tip: Be careful about bad mouthing your employer on social media as you could be breaching the terms of your agreement.
There may be restrictions listed in your contract covering what you are allowed to do once you leave your employment. These may be listed out in your settlement agreement. These could cover non-poaching
of staff, non-solicitation of clients,
or not working for a competitor within a certain timeframe.
The confidentiality clause is extremely important for your employer and will usually prevent you making comments in the press or on social media. Sometimes the scope will need to be reduced
to allow you to tell future employers about the circumstances of
Understanding and complying with the terms
It is really important you understand everything within the settlement agreement and if there is anything to which you are not able to agree, or if you have already broken any of the terms, you must tell your solicitor. This includes if you have spoken to colleagues about your negotiations before you saw the confidentiality clause. If you don’t let your solicitor know and you sign the agreement, you could open the door for your employer to refuse to pay the settlement or to claw back money they have already paid you.
How much will it cost?
Your employer should expect to pay between £350 and £500 towards your legal fees for a straightforward case. If you take advice from a solicitor about a settlement agreement, but you decide not to accept the terms offered, then you may be liable to pay your solicitor’s fees.
- Emma Gross is a partner in employment law and data protection at Spencer West LLP.
www.spencer-west.com, 020 7925 8080
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