Your invalid agreement
We’ve had a rash of settlement agreements to draw up recently.
Usually, we’re asked to do these because the business doesn’t want to go through a lengthy redundancy process before possibly parting company.
However, the struggle is usually getting the business to understand that they are not just paying the employee their notice to go.
They have to pay them more than that (sometimes much more) as they’re actually paying them for giving up their right to sue the business.
And you have to pay tax and NI on notice periods, even under a settlement agreement.
So, to work out how much you should be paying, as a minimum, you need to pay them their notice period PLUS what they would have got if they had been made redundant PLUS a sum for giving up their right to sue you.
This only works as a ballpark figure if we are talking about unfair dismissal – if it’s discrimination, then you really need to be willing to offer at least one year’s pay.
