Redundancy and settlement agreements in COVID-19

Man in suit with hands on table

Sadly, the necessary restrictions on businesses to limit the spread of Covid-19 have led to an increase in people being made redundant.

This has happened across Scotland in all areas of businesses.

Two common reasons for redundancies is because:

  1. a long-term downturn in business means an employer can no longer afford to pay staff
  2. the UK government’s Coronavirus Job Retention Scheme has not been able to help ease financial pressures.

When people are faced with being made redundant their employer may come to them with a settlement agreement.

So what is a settlement agreement?

A settlement agreement is a legal contract where an employee gives up the right to pursue any future legal claims such as unfair dismissal following redundancy.

Why should I accept a settlement agreement?

One benefit is that employees can receive a higher payment compared to the amount they’d get if they went through statutory redundancy terms.

However, advice should always be taken from a specialist employment law solicitor so you don’t agree to unfair terms or miss out on other payments you are entitled to.

For example, there may be restrictions on working for a competitor or dealing with certain businesses after your employment ends.

You must also get independent legal advice on the terms in a settlement agreement for it to be valid.

How long do you have to consider a settlement agreement?

The ACAS Code of practice on settlement agreements provides  a general rule that an employee should have a minimum period of 10 days to consider a proposal and to take legal advice.

What happens if I refuse to sign a settlement agreement?

You do not need to accept a settlement agreement if you do not wish to.  If the alternative is redundancy cay then you would receive the payments that you are entitled to for redundancy.

Can you be offered a settlement agreement after furlough?

Simple answer, yes. Furlough is a temporary alternative to redundancy through the CJRS but as the scheme draws to a close on 30 September 2021, this will not protect furloughed jobs in the long term.

If your employer ultimately needs to make some employees redundant because of a longer term downturn, then a settlement agreement could be proposed to you.

How has COVID-19 impacted the settlement agreement process?

A number of employers have proposed settlement agreements as a way to agree a mutual termination of employment without the need for a dismissal due to redundancy.

Can you change a settlement agreement?

Digby Brown have specialist employment law solicitors who are experienced in providing advice on settlement agreements, negotiating termination payments and drafting changes to the terms where required.

Our employment team have helped a number of clients to negotiate the terms of settlement agreements.  One client recently provided us with feedback through Trustpilot to say:

“An excellent service from Ross at Digby Brown Solicitors. Good advice to navigate safely through complicated employment issues and a good result achieved.

"Ross was responsive, empathetic but also gave sound guidance and throughout professional.”

Another client commented “Great Service from Digby Brown with straight forward recommendations provided. Made the process really easy.”

If you need advice in relation to a settlement agreement, then please contact us either on the number below or by submitting an enquiry form.

For help with other employment related matters during COVID-19, please visit COVID-19 - your employment rights to get answers to some frequently asked questions.