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Background to Redundancy Settlement Agreements
Settlement agreements are commonly used when an employee is leaving a role, particularly in redundancy situations or where there has been a workplace issue.
Employers use this as a way for both sides to draw a line under the employment relationship. The employer offers a financial package, and in return the employee agrees not to bring any claims against the employer. These agreements are usually marked ‘without prejudice’ and are often used to avoid disputes going further.
What is a Settlement Agreement?
A settlement agreement is a written contract between an employer and employee which sets out the terms of leaving your employment. Once signed, the agreement is legally binding.
It will normally cover things such as: The termination date, any payments being made (for example notice pay, redundancy pay or compensation), what the employee agrees to (including not bringing claims), and other points such as references and confidentiality.
Redundancy and Settlement Agreements
In redundancy situations, a settlement agreement is often used to bring the process to an end in a way convenient for both employee and employer.
Employees may be offered extra payment in addition to their statutory entitlements in return for signing the agreement. It is important to make sure that everything you are owed and have agreed has been included in the agreement and that the offer is fair.
For employers, these agreements provide certainty and reduce the risk of future claims.
Independent Legal Advice (ILA)
A key part of any settlement agreement is that the employee must receive Independent Legal Advice (ILA). This is a legal requirement and without it the agreement will not be valid.
A solicitor will explain what the agreement means in practice, what claims are being given up, Whether the payment is what you expect and have agreed, and any ongoing obligations, such as confidentiality.
At Lawdit Solicitors, we regularly provide ILA on settlement agreements. We aim to keep the process quick and straightforward. In most cases, there is a provision in the agreement where your employer will contribute towards our legal fees.
Conclusion
Settlement agreements are widely used in redundancy and other employment situations and can be a sensible way to bring matters to a close.
However, it is a legal requirement that an employee receives ILA and it is important that employees fully understand what they are signing before agreeing to the terms.
If you have been offered a settlement agreement, or if you are an employer looking to put one in place, our team can help meet your needs.
If you have any legal queries or require Independent Legal Advice, please contact our expert team of solicitors through info@lawdit.co.uk or alternatively you can give us a call on 023 8023 5979.
