Redundancy is one of the most stressful experiences in working life, and it is also the most common reason employees are handed a settlement agreement. If you are in this position, understanding how the two fit together could be worth thousands to you.
Why Employers Offer Settlement Agreements In Redundancy
A genuine redundancy does not legally require a settlement agreement. So why offer one? Usually because the employer wants certainty. In exchange for an enhanced payment, you agree not to bring claims such as unfair dismissal. Often it also allows the employer to shortcut a lengthy consultation process.
That certainty is valuable to them, and you are entitled to make sure you are being properly compensated for providing it.
It is also worth knowing that statutory redundancy pay is calculated by a fixed formula based on your age, length of service and weekly pay, subject to a cap. Many employees are surprised at how modest the statutory figure is, which is exactly why the enhanced terms in a settlement agreement matter so much.
What Should A Redundancy Package Include?
As a minimum you should receive your statutory redundancy pay, your notice pay or payment in lieu, and any accrued holiday. A settlement agreement should offer more than the statutory minimum, otherwise there is little reason for you to sign away your rights.
Look out for enhanced redundancy terms, bonus and commission entitlements, pension contributions, an agreed reference, and the correct tax treatment. The first £30,000 of genuine compensation can usually be paid tax free.
Was Your Redundancy Genuine?
This is where expert advice really matters. If the selection process was flawed, consultation was inadequate, or redundancy is being used to disguise another reason for dismissal, your negotiating position is far stronger than you might think. We review the full picture, not just the document, and we have helped clients increase redundancy packages from £15,000 to £28,000.
Do Not Sign Before Speaking To A Specialist
With more than 35 years of employment law experience, we provide clear, jargon-free advice, same day reviews and no hidden fees, and your employer pays all costs. Get your free redundancy settlement review today.
