The boss wants to do a “quick catch-up” at 4:45 on Friday. And then by Monday, you have a redundancy settlement agreement, a deadline and a mounting feeling that no one told you about this side of things. Many people forget that a settlement is an offer and offers can be negotiated!
It does not have a predetermined formula as there is with statutory redundancy pay, meaning the terms are often subject to negotiation. The downside is that signing is typically done at the expense of relinquishing some of your legal rights. Seven points to consider about settlement agreements, their differences from statutory payments and what makes them binding are described below.
Factors to Consider Before Signing a Redundancy Settlement Agreement
There are 7 checks to prevent you from spending lots of cash in a sorry way. A redundancy settlement agreement needs to be scrutinised carefully due to its terms influencing the final amount of money you will receive. Undertake them with care and ideally with an independent adviser before signing on the dotted line.
The Total Package
Calculate all payments including settlement sum, notice pay, holiday pay and statutory redundancy pay. Make sure to verify every detail individually, don’t lose anything in one aggregated number.
Tax Treatment
Learn whether the payment will be taxed. There are some termination payments that are exempt from tax up to a maximum limit and others, such as pay in lieu of notice, are taxable.
Notice and Timing
Confirm the date of your departure and whether you will work your notice, take garden leave or resign immediately. Timing has an impact on salary, benefits and job hunting.
Restrictions after Leaving
Inspect for confidentiality, non-disparagement and restrictive covenants, including “non-compete” provisions. See how long and how wide they are, as there is a possibility of restricting your next role.
The Reference
Seek to have an agreed-upon wording of your reference put into the contract itself. An agreed-upon written reference eliminates any doubt regarding what the next employer will hear.
Pension and Benefits
See how your pension, health cover, car and bonus would be affected. Often benefits will end at the exit date, so find out if there are any breaks in coverage.
Independent Advice
This arrangement will only apply in the event of waived claims if you are receiving independent advice. Most of the time, there is a contribution from the employer, so ask in the beginning.
Difference Between Redundancy Settlement Agreement and Statutory Redundancy Pay?
Statutory redundancy pay is the minimum amount of money that should be paid out, and a settlement is an agreement made after negotiations. Below are five facts to know about the difference.
Legal Entitlement
Statutory redundancy payment is legally mandated for eligible workers, usually after two years of continuous employment. A settlement is arrived at between you and your employer, hence, it is open to negotiation.
Calculation
Statutory pay is calculated on a formula based on age, length of service and capped weekly pay. There is no simple formula for the amount of settlement money that will be awarded, thus there is a need to negotiate.
Waiving Claims
The statutory payments are asking nothing from you. In a settlement, you are typically asked to give up certain types of claims against your employer, including those for unfair dismissal.
Extra Terms
These may comprise benefit packages, a reference and improved payments. Since statutory pay is just a predetermined amount, it cannot include those bargained-for extras.
They Can Work Together
Statutory redundancy payment is one of the elements of a settlement, along with any additional signing bonus compensation. Request itemised figures so you can understand what each one is.
What Happens Before a Redundancy Settlement Agreement Becomes Binding?
Writing and Specifics
The contract has to be written and it has to relate to specific issues or actions. An oral agreement or even an e-mail is not sufficient for the purpose.
Independent Advice
Advice on the terms and their implications needs to be sought from an appropriate independent adviser. It is important that the independent adviser is indemnified and mentioned in the consultancy contract.
Time to Consider
ACAS guidance suggests that a minimum of 10 calendar days should be allowed to explore and assess an offer. At that moment, take counsel, don’t panic-scroll employment forums.
Both Sides Must Sign
The settlement agreement should have the consent of both the employer and employee, as well as confirmation by the adviser through signing. Until the agreements are signed, you can continue negotiating or even abandon it.
Statement of Conditions Met
The contract should specify that the legal requirements for valid settlement have been met. Failure to do so may lead to not enforcing the waiver of statutory rights.
Conclusion
The payment offered by the redundancy package may be more than the minimum required under law, but accepting it means that you have given up any right to file specific claims. Review each and every term and seek independent counsel before signing.
