Redundancy & Settlement Agreements
Redundancy and settlement agreements often arrive together, and both can move quickly once your employer has decided on a course of action. We help you understand whether a redundancy process is genuine and fair, and what a settlement agreement actually means for you before you sign anything.
What the law says
A genuine redundancy exists where the need for employees to carry out work of a particular kind has ceased or diminished, or the business is closing altogether or at your location. For a redundancy dismissal to be fair, your employer generally needs a fair reason, a fair selection process where more than one employee could be at risk, and proper consultation before any final decision is made. Employees with at least two years' continuous service are usually entitled to statutory redundancy pay.
A settlement agreement is a legally binding contract in which you agree not to pursue certain claims against your employer, usually in return for a payment and an agreed reference. Under section 203 of the Employment Rights Act 1996, a settlement agreement is only valid if you have received independent legal advice from a relevant adviser on its terms and effect, including what claims you are giving up. Because that advice is a legal precondition for the agreement to be effective, the employer usually contributes a fixed amount towards the cost of it.
Settlement agreements are often, though not always, offered in the context of a redundancy process. They can also be used to resolve other workplace disputes. Either way, signing one closes off your ability to bring the claims it covers, so understanding exactly what is and is not included matters.
How RGF helps
Where redundancy is genuine, we check that the process itself was handled fairly, including selection criteria and consultation, and confirm what you are owed. Where something looks off, whether that is a role that has not really disappeared or a selection process that seems to target you specifically, we advise on whether the redundancy is likely to be fair.
For settlement agreements, we review the terms, explain in plain English what claims you would be giving up, check the figure offered against what your claims might realistically be worth, and negotiate improved terms where there is room to do so. We then provide the independent legal advice required to make the agreement valid.
Already have a settlement agreement to review?
Settlement Advice, RGF Lawyers' dedicated settlement agreement service, focuses exclusively on reviewing and negotiating settlement agreements, usually within the fixed-fee arrangement your employer has already agreed to cover.
What to do next
Speak to one of our solicitors to find out where you stand. We will explain your options in plain English before you decide what to do next.
Frequently asked questions
What makes a redundancy genuine and fair?
A redundancy is generally fair where there is a genuine business reason for reducing headcount, such as a role no longer being needed, and the employer follows a fair process. That process usually includes the group of employees considered for selection (the selection pool) being identified reasonably, and a reasonable selection method applied consistently, meaningful consultation with affected employees, and consideration of suitable alternative roles before dismissal.
Am I entitled to redundancy pay?
Employees with at least two years of continuous service are usually entitled to statutory redundancy pay, calculated using age, length of service, and weekly pay, subject to a statutory cap. Some employers offer enhanced redundancy pay above the statutory minimum, particularly where the redundancy is dealt with by way of a settlement agreement.
Do I have to sign a settlement agreement?
No, you are never obliged to sign one. A settlement agreement is only binding once you have received independent legal advice on its terms and effect, so you have a genuine opportunity to understand what you are giving up before deciding whether to sign.
Why do employers pay towards my legal advice on a settlement agreement?
A settlement agreement is only legally valid if you have received advice from a relevant independent adviser, usually a solicitor. Because that advice is a legal requirement for the agreement to work, employers typically contribute a fixed sum towards your solicitor's fees for reviewing it.