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In March, the government introduced the concept of furlough leave under the Coronavirus Job Retention Scheme. Furlough is intended to avoid employees being made redundant by partly funding their wages if it is unsafe for them to go into the workplace and if they could not work from home.
However, many employers have still felt the need to make redundancies. In some cases, this may involve a settlement agreement, which offers employees the potential to receive a better redundancy package while also preventing them from bringing an employment tribunal against the employer. This is often a better option for both the employee and employer.
Learn how it works in this guide to settlement agreements during the COVID-19 pandemic:
Redundancies are complicated processes that often involve lengthy consultation periods – a process that could be even more complicated while employees are furloughed and practicing safe social distancing. Settlement agreements, alternatively, mean you will not need to go through the consultation procedure, saving the company time, stress, and costs.
These agreements often involve an enhanced redundancy payment because employers can benefit from a smooth exit and protection against any future claims. Settlement agreements prevent employees from bringing an employment tribunal claim against the employer, potentially for a claim for unfair dismissal.
A settlement agreement only comes into effect if both the employee and the employer agree to it – so you have the option to refuse the initial offer if you want to. Employers should give you at least 10 days to decide whether or not to accept and you will remain employed until the agreement is settled.
Each settlement agreement will vary but usually the documents include sections that deal with the claims to be settled, the payments to be received and the relevant tax issues, and a confidentially/gagging clause, and any agreed reference from your employer.
There are a few considerations to keep in mind when being offered a settlement agreement:
It can be a complicated decision, which is why it is important to work with an experienced law firm who can advise you on your best possible options.
Once you’ve been offered a settlement agreement, you should consider whether you might be able to make a counter offer. Do you have any incentive to ask your employer to pay you more money? Or could you make a legal case against your employer?
Employees may have a legal case if:
You could threaten legal action in order to demand a high settlement package if any of those cases apply.
Employers also must use performance indicators from before the coronavirus pandemic because the workforce has been facing issues with childcare and the potential need to shield over the last few months.
There is also the option to negotiate based on good will. Consider how much you’ve contributed to the company or rationalise how negatively the redundancy situation might affect you and your family.
A settlement agreement will only become legally binding once you have received independent legal advice on it. It’s likely that your employer will recommend a solicitor, however, keep in mind that you are free to choose your own.
Our private client team is offering legal advice via the phone, video conference and/or email to ensure safe social distancing. We have worked with hundreds of employees during the lockdown to secure them the best possible settlement agreement packages.
Contact us to discuss your circumstances and we will advise you on the best possible route to keep you financially sound.
Request a callback and our team will be back in touch as quickly as possible for a free initial consultation. We're continuing to deliver a quality service in these changing times and our teams are available to take new enquiries and manage existing caseloads via calls and/or video conferencing.