Redundancy, Severance Deals and Settlement Agreements

By Kevin Basnett, 8th February 2020

Learn all about Redundancy, Severance Deals and Settlement Agreements as businesses restructure following the pandemic and lockdowns.

These are turbulent times for the workforce of Great Britain Plc.  There has already been much restructuring, reorganisation and redundancy affecting our livelihoods and more is likely to follow with the ending of the Coronavirus Job Retention (Furlough) Scheme at the end of April 2021.  As employers, some of whom may have been “hanging on”, face up to the grim reality of what they may need to do to either close their business or restructure it in such a way that it may survive we  employees would be wise to do a sense check on the security of their position

If you feel that  as an employee you are at risk of being made redundant or there may be some confrontation or difficulty within the workplace, because your values and those of your employer do not align, then the best thing you can do is get yourself a plan B as soon as  possible by trying to find alternative or more congenial work. If your sense check says to you that you are vulnerable it is likely to be right. Most employers tend naturally to hope things will improve which leads to a delay in them taking action and can lead to a false sense of security for employees. 

If you are minded to “hang on” or take steps to try to get yourself some sort of severance deal then that is all well and good but it is really important to understand that the value of any severance deal, whether it be in the form of a redundancy payment or compensation via a Settlement Agreement, is determined  by how long it takes to find alternative work. 

You may get a fantastic large package but if it takes you a long time to find another that can make it a poor package as you fritter away the lump sum using it to provide an income. You may also have a fair bit of heartache and anxiety whilst you try to find another job and see the lump sum dwindle.

On the other hand you may get a relatively small deal and may leave with  dignity intact but if you have got another job to go to, that could be a good deal because you have got money in your pocket which will not need to be frittered away on day to day living expenses.

 All these things are worth thinking about and exploring with a view to maximising your position. It really means thinking ahead, sussing out the psychology and business economics in play getting to grips with them.

The best approach to two-pronged work on the deal but work very hard on the new job or role. 

Often employees ask the question whether they should resign and claim constructive dismissal.  Constructive dismissal is where the employee has to prove that they have immediately resigned as a result of a fundamental breach of contract.  Normally this arises because there is some confrontation within the workplace and the values, and the attitudes of the employer and the employee do not meet and difficulty and aggravation results.  There is no alignment between the “master and the servant”.

However, in those circumstances’ constructive dismissal or a resignation and  hoping to be able to claim damages is the worst option.  Firstly, the employee has to be able to prove that there was a fundamental breach of contract and often that may not be easy . Secondly, one then needs to resort to difficult  Tribunal proceedings and launch a claim in order to do that and thirdly, Tribunal proceedings, particularly at the moment, with the Courts in disarray, take a long time and are extremely complicated and often very expensive.  Rather than go down the “woe is me” constructive dismissal route, a better option is often to hang on to the levers that you have whilst you are an employee. These levers may include grievance procedures or  simply having a discussion with your employer whether it is on a without prejudice basis or not, about the difficulties they are and you are facing  to see whether or not a dignified exit on acceptable terms can be arranged.  Obviously if you have got your plan B in your back pocket, in most cases you will want to keep that to yourself. But if you have a new job  and you can get a deal, then you are likely to be in a good place. 

The best advice is to plan ahead and get in early. Take a good stocktake of your position now and understand the psychology, dynamics and economics that are affecting your relationship with your employer so that you can make good and informed decisions and have some control over the way forward. Then if you need to move, work hard on your future role to increase the effective value of any exit  deal you achieve.

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