My position is going to be made redundant. Am I entitled to redundancy pay and compensation? Why might my employer offer me a Settlement Agreement?
So it very much looks like the UK will be in a recession during 2023.
Although there is currently high employment and staff are in demand, it is likely that some employers will need to consider headcount and make redundancies.
Unless the employer acts in accordance with good employment practice and legislation, it risks terminating staff in breach of contract and unlawfully. It’s a given that any termination will be unsettling for an employee but will an affected employee also be able to assert that they are entitled to be compensated by their employer. The answer is possibly:-
If an employer wants to make a person redundant (there are extended consultation periods when an employer makes more than 20 people redundant) then it must act in accordance with the contract of employment and ensure that it terminates “fairly” further the Employment Rights Act 1996.
The contract will set out how much notice an employee is entitled to receive. Further to statute, an employee is entitled to receive a week’s notice for each continuous year of service, subject to a maximum of 12 weeks’ notice. Many employers issue contracts of employment which provide for a longer period of notice and if so, then that period must be given.
Contract aside, an employer must have fair reasons for terminating an employee’s employment (e.g. redundancy) and adopt a fair procedure. A typical redundancy procedure, would mean the employer must warn the employee (or a pool of employees if they have similar positions) that their position is at risk; to invite them to a consultative meeting (providing sufficient prior notice), and inform them of their right to be accompanied by a work colleague or trade union representative; hold one or more consultative meetings as necessary; apply objective criteria to determine who is to be made redundant from within the pool (if appropriate) and consider whether there is any suitable alternative employment before notice of termination by reason of redundancy is provided.
If redundancy is imposed then the affected individual may be entitled to redundancy pay. There is no entitlement if the employee has less than two years’ continuous service. Redundancy pay is determined by reference to a week’s pay (currently capped by statute at £571) and multiplied by the number of years’ service (subject to a maximum of 20 years) and further influenced by the age of the employee. Statutory redundancy pay is not generous.
A significant number of employers, when imposing terminations (whether based on redundancy or otherwise) offer “Settlement Agreements” – a full and final agreement that seeks to compromise any potential claim against an employer. Why? Some employers are genuinely trying to be generous but others simply don’t want the potential hassle of claims and therefore seek to buy closure on the matter, which is what a Settlement Agreement should achieve.
Unless an employer acts with care and further to professional advice, terminating staff in accordance with their contracts and without infringing legislation can be a minefield e.g. claims based on unfair dismissal or further to the Equality Act, to name a couple. If you think you employer has acted unlawfully it may give you an angle to help negotiate better settlement terms and I can assist. You need an angle otherwise you are merely going in saying “Please Sir, can I have some more” without any lever for your request.
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