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What to do if you’ve been offered a settlement after being furloughed

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:

How can I get a settlement agreement after being furloughed?

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.

Pros and cons of settlement agreements

There are a few considerations to keep in mind when being offered a settlement agreement:

  • It’s possible that being made redundant might be a more suitable financial option – it’s important to do the calculations.
  • Check whether you would be on your full contractual salary during the redundancy process or if you’d be on a furlough rate.
  • Is there an option to change your employment agreement, for example to work part-time rather than being made redundant?
  • How long would the redundancy consultation procedure take? This depends on if your employer is making large scale redundancies which could mean it would take several weeks.
  • Is the process fair? You waive your right to claim unfair dismissal if you sign 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.

furlough settlement agreement

Negotiating a settlement agreement

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 have been unfairly selected for redundancy, for example if you are only being made redundant because you have been on furlough
  • It is not a genuine situation to need to make a redundancy
  • You believe that you’re being discriminated against

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.

Getting legal advice for a settlement agreement while social distancing

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.


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