What is a Settlement Agreement? A settlement agreement is where an employee agrees to waive their right to bring legal action against their employer. This is more often than not in exchange for a settlement payment.
A Settlement Agreement is often used in a redundancy arrangement. But it should be noted that redundancy and settlement agreements are NOT the same thing – though they are related.
You might have been offered a settlement agreement, or you may be an employer considering your options ahead of a redundancy situation.
In all cases involving Redundancy or Settlement Agreements, it is always worth seeking advice from an Employment Solicitor Near Me.
So, let’s start from the beginning…
What Constitutes Redundancy?
In its simplest form, redundancy is where the needs of the employer for a work of a specific type has reduced to the point where they don’t need as many staff as they previously did.
OR it can mean the employer is closing a workplace, and the staff who work there will be asked to relocate. If they’re not able to do so, whatever that reason may be – then they could be made redundant.
The key here is that any employer that finds themselves in a redundancy situation MUST go through a fair redundancy procedure before making any decisions on redundancy.
That could include applying fair selection criteria, consulting with employees, explaining the reasons, exploring whether there might be alternative options, and allowing employees to appeal against their redundancy.
The reality is this can be a difficult situation for employers to manage. It’s time-consuming, involves A LOT of administration, and it’s not conducive to good morale.
Hence why many employers will offer a settlement agreement as an alternative to going through the process of redundancy…
Should I Be Offered Or Accept A Settlement Agreement Instead Of Redundancy?
It’s a valid consideration.
Since one of the most important factors in a settlement agreement is that the employee waives the right to progress through a fair redundancy procedure in exchange for a settlement fee.
The positives of a settlement agreement are obvious. The employee gets more money, and the employer can spend more time running their business. Avoiding having to go through the redundancy process where one or both parties might become agitated is beneficial.
You should know, though, that the employee DOES NOT have to accept the settlement agreement – if they refuse, the employer still has the option to press ahead with the redundancy process.
In this instance, it would be advisable to seek legal advice. To ensure that the procedure has been conducted fairly or whether there might be the potential for an unfair dismissal claim.
It might be preferable for the employee to accept the settlement agreement for several reasons:
- The financial settlement is likely to be higher than they’d get through redundancy
- It allows them to finalise the process quicker and move on with their next opportunity
- It allows for the process to be conducted in a civil and agreeable manner
Can An Employee Request A Settlement Agreement?
It’s unusual because the suggestion usually comes from the employer. But, an employee is perfectly entitled to ask their employer to engage in a protected discussion over a settlement agreement.
It might be prudent for some employees to do so if they know that restructuring is on the horizon. Especially if they know that their position might be vulnerable.
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