Using a redundancy settlement agreement calculator to work out your potential liability if your business is making redundancies is a sensible starting point. However, statutory redundancy pay is just one part of what an employer may owe when a redundancy exit is concluded through a settlement agreement. The way the redundancy process was handled, the length of service involved, and any claims the employee could realistically bring at tribunal all affect the final figure. Our consultants work with small businesses across the UK every day in exactly these situations, advising them on the redundancy process they must follow and assisting them in reaching commercially viable settlement agreements where necessary.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
Redundancy And Settlement Agreements
A redundancy is a specific legal reason for dismissal. A settlement agreement is a mechanism for resolving a dispute or ending employment on agreed terms. Employers sometimes use settlement agreements in connection with redundancy exits to obtain certainty that the departing employee will not return with a claim.
A straight redundancy, handled correctly with a proper process, does not require a settlement agreement. The employee leaves, receives their statutory or enhanced redundancy pay, and the employment ends. The reason employers bring a settlement agreement into the picture is usually because the process has not been straightforward, there is a risk the employee could argue the redundancy was unfair or a sham, or there are potential claims in the background, such as discrimination, that need to be formally addressed.
When The Redundancy Process Can Put Your Business At Risk
Employers must handle redundancies in a fair way. Sometimes, things go wrong, despite the employer’s best intentions. Time pressures, a reluctance to have difficult conversations, or a lack of familiarity with what the law requires can all render a redundancy process unfair and expose the employer to legal claims.
The most common mistakes employers make in the context of redundancy are not carrying out proper consultations, not applying selection criteria fairly and consistently, not considering suitable alternative roles, and not giving the employee a right of appeal. Any one of those gaps can give rise to an unfair dismissal claim.
Selection criteria must be objective, applied consistently, and capable of being evidenced. Criteria that appear neutral but disproportionately affect employees sharing a protected characteristic, such as part-time workers, those who have taken maternity or sick leave, or older employees, can give rise to discrimination claims that sit alongside the unfair dismissal risk.
A settlement agreement can be an invaluable tool in resolving issues with a redundancy process. It provides the employee with compensation for any procedural shortfall, and it provides the employer with protection against the claim that would otherwise follow. Where selection has been poorly managed, the settlement agreement needs to account for that additional exposure. A discrimination claim carries no cap on the compensatory element, which changes the risk calculation substantially. The settlement figure needs to reflect the realistic value of the claim being waived, not just the redundancy entitlement. We can help you plan the selection process in accordance with the legal requirements and identify where additional compensation in the settlement is warranted.
What Goes Into A Redundancy Settlement Agreement Calculator?
The calculation in a redundancy context has a specific structure. The starting point is the statutory redundancy entitlement, worked out using the employee’s age, length of service, and weekly pay. That figure is what the employee would receive regardless of whether there is a settlement agreement. It does not need to be inflated simply because a settlement agreement is being used.
On top of the statutory entitlement, the employer can offer enhanced redundancy pay. This may be a contractual obligation if the employment contract or a company policy provides for enhanced terms. Where it is discretionary, the level of enhancement is a matter of negotiation and should reflect the commercial context. A longer-serving employee with a clean record and a strong relationship with the business is in a different position from someone who joined recently and against whom performance concerns were already building.
Notice pay must be calculated in accordance with the PENP rules, with the taxable and non-taxable elements correctly separated. Accrued holiday is added on top. The ex gratia payment, if any, often reflects the value of the claims being waived, discounted for the probability that those claims would succeed at tribunal.
Speak To Us
We have been supporting small businesses through redundancy processes since 2003, from single employee exits to complex collective exercises. If you are planning a redundancy, or if a process is already underway and you need advice, we are perfectly placed to assist. All initial enquiries are free and will help you understand the options available to you.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
