Redundancy and Settlement Agreements – Which is Right for Your Business?

January 24, 2024

Unfortunately, redundancy and potentially settlement agreements are the only logical steps that can be taken when times are tough. A study issued by Acas in 2023 indicated that 3 in 10 employers were likely to make staff redundant over the course of the year, highlighting the difficulties many businesses are currently facing.

It goes without saying that these are not matters to be taken lightly, so it’s vital that employers have all the information and guidance they need to follow the correct procedures.

If you are an employer that is considering the prospect of making redundancies or issuing settlement agreements, guidance from a specialist employment law solicitor is essential.

In this article, we discuss the processes for redundancies and settlement agreements, advising on the merits and risks of both options

While we hope this article will be helpful, every situation is unique, so this should not be taken as legal advice. If you need any further guidance on redundancies and settlement agreements, our employment law solicitors will be happy to support you further.

To speak to one of our experts, please contact us today by calling 0800 1584147, emailing info@tayntons.co.uk or requesting a call back.

What does the redundancy process involve?

If you are considering making an employee redundant, you should be aware that there are various strict requirements which need to be fulfilled.

If you are making fewer than 20 people redundant, the process must indicate how and why you choose people for redundancy, how long the decision will take, what meetings an affected employee can attend and what their options are for making an appeal.

As an employer, you should also arrange a meeting with any employees who you intend to make redundant. Employees should be provided with the opportunity to ask any questions about the process and a discussion should be held about any alternative options that may be available (such as changing roles and working hours).

Note that a ‘collective consultation’ will be required if you are planning to make 20 or more redundancies. This is a separate process that will include steps such as the election of staff representatives.

Why is a ‘fair’ redundancy process so important?

Redundancy is a sensitive issue. If you do not have a thorough redundancy plan and process, employees who are made redundant may be able to claim that any decisions that have been reached are ‘unfair’. This could present several potential issues for your business.

Following a fair redundancy process is a legal obligation, which means any employees who believe that the procedure followed was not fair could potentially bring a claim for unfair or wrongful dismissal. In some cases, they may be able to make a claim for discrimination.

Being subject to an Employment Tribunal case can be extremely damaging for your business, even if you end up on the winning side of the case. Time, money and resources will be spent, and you ultimately run the risk of experiencing substantial reputational damage.

What does the settlement agreement process involve?

In many cases, the most obvious alternative to redundancy is a settlement agreement. This is largely because a settlement agreement will remove the potential for a former employee to be able to make a claim.

Settlement agreements serve largely the same purpose as redundancy (i.e. the employee ceases to work for the business and is compensated), with the important distinction being that they are voluntary and entered into by mutual agreement.

Which is right for your business?

Knowing whether redundancy or settlement agreements are right for your business can be difficult. While the prospect of removing any future conflicts by way of  a settlement agreement can be appealing, it may not be appropriate (or possible) in every circumstance .

Exactly which option is right for your business will depend on multiple factors. Identifying the right approach is something our specialist employment law solicitors can support you with further.

Get in touch with our employment solicitors in Gloucester

For help with any aspect of employment law in Gloucester, Cheltenham, the Forest of Dean or anywhere in Gloucestershire, please contact us today by calling 0800 1584147, emailing us at info@tayntons.co.uk or requesting a call back.