Redundancy Compromise Agreement – Are You Getting What You Are Entitled To For Redundancy?

(Newswire.net — February 14, 2013) Milton Keynes, Buckinghamshire, UK — An increasing number of UK employers are now utilising legally drafted documents known as compromise agreements in redundancy situations to safely terminate contracts of employment.

There is a good reason for this, which we explain below. And equally, for the reasons we shall shortly explain, it is important for employees to understand their entitled on redundancy and how to identify if they have grounds to negotiate a better redundancy compromise agreement.

A compromise agreement is a specifically drafted legal contract or agreement that is designed to end a contract of employment between an employer and an employee.

The main purpose of the agreement is to bring to an end a contract of employment with an agreed financial package that is offered to the employee in exchange for which the employee promises not be bring any employment related claims against the employer. Once that agreement is signed, the employee cannot later go back to regnotiate or seek further compensation in an employment tribunal or court of law.

A compromise agreement on redundancy is the only legally binding agreement that an employer can safely rely on to ensure that they are not the unwitting recipient of an employment tribunal claim or a claim in the civil courts of law.

However, for compromise agreements to be legally binding and enforceable, the law prescribes certain conditions, the main condition being that an employee obtain independent legal advice.

Faced with the prospect of redundancy and the uncertainty of knowing how long it will take to find alternative employment, an employee ought to have some understanding of his or her entitlement on redundancy and whether there is room for negotiating a better redundancy deal.

As a starting point, all employees are entitled to notice of termination of employment, except in situations of gross misconduct in which case an immediate dismissal is permitted.

To determine the length of notice, and therefore pay that an employee is entitled to, there are two sources of reference.

The first point of reference is what the law or statute says an employee is entitled to.

And the second, is what an employee’s individual contract states as notice period. The employee is entitled to whichever notice period is the greater of the two.

Statutory notice is calculated by reference to the number of years of service. The law says that an employee is entitled to one week’s notice after working for more than one month but less than two years. Thereafter, an employee is entitled to 1 week’s notice for every year worked. So two years of continuous employment equates to 2 weeks notice.

If an employee’s contract gives a more generous period of notice, then this will apply in place of the statutory notice period.

In addition to notice, and perhaps pay in lieu of notice, an employee is also entitled to all other benefits received pursuant to the contract of employment up to the date of dismissal. For example, healthcare cover, car allowance, company car, bonus pay and so forth.

As with notice, to calculate redundancy pay, one must consider both the statutory position and also the employee’s contractual rights.

If a company runs a redundancy scheme, more often than not this will be more generous than the prescribed statutory minimum redundancy that all UK employees are entitled to – assuming that the employer has served the qualifying period of two or more years of continuous employment with their employer.

Bear in mind also that contractual redundancy packages will usually already include statutory minimum redundancy pay. So any redundancy payments over and above the statutory minimum are considered “enhanced payments”.

So, in order therefore to assess the correct amount of redundancy pay, one must first ascertain whether the employer has a redundancy program in place. If the employer does run such a scheme an employee would need to start here to calculate their redundancy entitlement.

To calculate the statutory minimum redundancy pay, three factors are taken into consideration. The age of the employee, the length of service of employment (with a maximum 20 years), and the employee’s weekly pay up to a maximum of £450 (as at Feb 2013). For a fast and easy way of calculating statutory minimum redundancy pay, you can follow the link above.

What if you employer is only offering you the statutory minimum redundancy pay or a package that is only marginally above this? Under what circumstances can you negotiate better terms?

If an employee’s contract of employment is being terminated “under a cloud” for example, there is an ongoing dispute between the employer and the employee, or where it is believed the employer is unlawfully terminating a contract of employment, in these circumstances, an employee is more likely to have more leverage to negotiate a better redundancy settlement within a redundancy compromise agreement than in cases of straightforward redundancy.

Ultimately, what you can negotiate very much depends on a number of factors such as your skills at negotiating, whether your employer is open to some flexibility on final pay, and other factors such as mentioned above that may give an employee more persuasion since an employer will also want to avoid potential claims in the future.

For specialist help and advice on a redundancy compromise agreement, you can find more information at the following web address, www.cardonaandco.co.uk/compromiseagreement where you will also find a contact telephone number should you wish to speak with a specialist compromise agreement solicitor.