Settlement Agreement Lawyers that Offer the Best Advice
We are an experienced team of settlement agreement lawyers who understand the significant legal and financial implications of voluntary redundancy. When facing redundancy, you'll likely need to sign a settlement agreement that waives certain tribunal claims against your employer.
Employers typically provide at least 10 calendar days to consider voluntary redundancy terms and seek independent legal advice. This timeframe is important, but more crucial is your complete understanding of what you're agreeing to before signing any documents.
Settlement agreements linked to voluntary redundancy packages usually offer enhanced compensation beyond standard redundancy payouts. These agreements provide additional benefits above the statutory minimum. Remember that these documents are only legally binding after you've received independent legal advice from a settlement agreement solicitor. This ensures that you fully comprehend the terms.
Whether you've put yourself forward for redundancy, or your employer has requested volunteers, this guide will help you navigate the entire process. We'll explain your rights, how to assess if your redundancy package is fair, and what elements you should negotiate. Our settlement agreement lawyers are committed to protecting your interests and ensuring you receive the compensation you deserve during this challenging period.
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What Voluntary Redundancy Really Means
Voluntary redundancy occurs when you choose to leave your job in exchange for a financial package. This arrangement happens when an organisation needs to reduce its workforce and offers employees the option to step away willingly.
How voluntary redundancy differs from compulsory redundancy
The key difference between voluntary and compulsory redundancy is who initiates the departure. With voluntary redundancy, you actively put yourself forward for selection. In compulsory redundancy, your employer makes this decision through a formal selection process.
- Voluntary redundancy typically offers several practical advantages:
- Better financial compensation compared to compulsory packages
- More control over your career transition
- A more dignified exit process
- Room to negotiate certain terms of your departure
Your employer maintains the right to accept or decline your application based on business needs. If you possess specialised skills or experience essential to operations, your employer might reject your voluntary redundancy request.
When employers offer voluntary redundancy
Organisations typically consider voluntary redundancy under specific circumstances.
Financial constraints or declining business conditions often trigger these programs. Companies undergoing significant organisational restructuring or implementing technological changes that eliminate certain roles may introduce voluntary redundancy.
Voluntary redundancy sometimes serves strategic purposes beyond immediate cost-cutting. Businesses might use this approach to adjust their workforce age structure or skill composition. Employers often prefer voluntary programs because they create a more positive workplace culture and protect company reputation.
From a practical standpoint, voluntary redundancy gives employers a more transparent process that avoids potentially contentious selection criteria used in compulsory redundancies.
Why employees might choose voluntary redundancy
Many individuals find compelling reasons to consider voluntary redundancy offers, despite the prospect of job loss.
Financial incentives frequently top this list – employers generally make voluntary redundancy financially attractive by offering enhanced packages beyond statutory minimums. This enhanced compensation creates an opportunity to pursue alternative career paths or business ventures you may have been contemplating.
If you've been considering leaving your position already, voluntary redundancy presents a timely exit with added financial benefits. Some employees use this opportunity to step away from roles where they've become dissatisfied or to transition toward retirement.
Another consideration is that refusing voluntary redundancy doesn't guarantee job security. If your employer fails to secure enough volunteers, you might still face compulsory redundancy later. Potentially without the enhanced benefits offered through the voluntary program.
Voluntary redundancy can provide meaningful opportunities, but you should carefully evaluate your financial situation and job prospects beforehand. The seemingly substantial payment amount must be weighed against how long it might need to sustain you until securing new employment.
What Happens When You Accept Voluntary Redundancy
When you accept voluntary redundancy, your employment relationship changes significantly. Our team of settlement agreement lawyers understands the formal processes that begin once you've made this decision and the specific financial and legal implications this creates.
What you’re agreeing to when you take voluntary redundancy
Accepting voluntary redundancy means you consent to your employment ending. Though you've chosen to leave, this is still legally classified as a dismissal rather than a resignation. This distinction matters because your statutory employment rights remain intact, including the right to reasonable time off to search for new employment or arrange training (provided you have the qualifying service).
Your employer will provide a formal letter confirming all termination details. This documentation is important evidence should any issues arise later. Remember that once you've voluntarily agreed to redundancy, you cannot later claim unfair dismissal specifically for the redundancy itself.
What's included in your redundancy pay?
Your redundancy package typically includes several elements:
- Statutory redundancy pay - The legal minimum for employees with at least two years of continuous service. As of April 2025, the maximum weekly pay used for calculations is capped at £719 per week, with total statutory payments capped at £21,570.
- Enhanced redundancy pay - Many employers offer more than the statutory minimum to encourage voluntary departures. These enhancements are often called "ex gratia" payments.
- Other contractual payments - These include salary up to your leaving date, performance-related bonuses or commission payments if applicable.
The calculation for statutory redundancy depends on your age, length of service, and weekly pay. For those under 22, you receive half a week's pay per year of service. Between 22-40, you get one week's pay per year. If you're 41 or older, you receive one and a half weeks' pay per year of service.
How notice and holiday pay are handled
Your employer must explain how your notice period will be managed. You'll either:
- Work through your notice period while receiving normal pay
- Receive "payment in lieu of notice" (PILON) and leave immediately
- Be placed on "garden leave" where you're paid but not required to work
The minimum statutory notice period depends on your length of service – one week for each complete year worked between 2-12 years, up to a maximum of 12 weeks. Your contract might specify longer periods.
For holiday pay, you're entitled to payment for any accrued but untaken holidays. If you prefer to take remaining holidays rather than receive payment, discuss this with your employer during the redundancy process. Even if placed on garden leave or given payment in lieu of notice, you retain contractual benefits such as pension contributions until your official termination date.
When a settlement agreement is used
Employers frequently use settlement agreements in voluntary redundancy situations, especially when offering enhanced packages. These legally binding contracts formalize the termination terms and typically include:
- Financial compensation details
- Confidentiality clauses
- Agreement not to pursue employment tribunal claims against the employer
For the settlement agreement to be legally valid, you must receive independent legal advice before signing. Employers normally cover the cost of this legal advice.
Through these agreements, you waive specific legal rights in exchange for the agreed compensation package. Understanding exactly what you're signing away is crucial before proceeding.
Understanding Settlement Agreements in Redundancy
A settlement agreement (formerly called a compromise agreement) is a legally binding contract between you and your employer that formally ends your employment relationship. This document sets out mutually agreed terms, typically providing financial compensation in exchange for waiving your right to bring certain employment claims against your employer. For the agreement to be valid, it must be in writing and relate to particular complaints or proceedings.
Why employers use settlement agreements
Employers primarily use settlement agreements to protect themselves from potential legal action. These agreements offer a way to reduce workforce without following the full redundancy process and without the risk of unfair dismissal claims. Settlement agreements help employers avoid formal disciplinary procedures, redundancy processes, and potential employment tribunal claims.
From your employer's perspective, these agreements provide legal certainty by clearly defining termination terms and preventing future claims. They also maintain confidentiality around the circumstances of your departure, which helps protect the company's reputation.
What you're giving up by signing a settlement agreement
By signing a settlement agreement, you relinquish significant legal rights. Settlement agreements are one of the few mechanisms by which you can sign away your employment rights. You typically waive your ability to:
- Bring unfair dismissal claims
- Pursue discrimination claims
- Make claims for statutory redundancy pay
- Challenge the redundancy process
- Discuss the terms of your departure (due to confidentiality clauses)
Remember that once signed, you generally cannot later enforce employment rights mentioned in the agreement.
What's usually included in the settlement agreement
Settlement agreements typically contain several standard components:
- Compensation details, including redundancy pay and ex-gratia payments
- Termination date for your employment
- Payment arrangements for notice periods and holiday pay
- Tax provisions and employee indemnity for tax liability
- Confidentiality clauses preventing discussion of terms
- Non-disparagement clauses restricting negative comments about the employer
- An agreed reference for future employment
- Repayment provisions if you breach the agreement
In some cases, settlement agreements might also include post-employment restrictions on your future work activities.
Why legal advice is required
Legal advice isn't just recommended - it's mandatory for the settlement agreement to be valid. The law specifically requires that you receive advice from a relevant independent adviser on the terms and effect of the agreement before signing. This requirement exists to protect your interests and ensure you fully understand what rights you're waiving.
Typically, your employer will cover the cost of this legal advice. This payment arrangement creates no conflict of interest for your solicitor, as they remain bound by professional obligations to act in your best interests, not your employer's.
The independent advice requirement also ensures you understand the agreement's implications beyond the immediate financial benefit. A qualified solicitor can explain whether the terms are fair and potentially negotiate improvements to the package offered.
Can You Negotiate a Better Deal?
Many employees believe their redundancy offer is final when there is often considerable room for improvement. Accepting the first proposal might mean losing thousands of pounds, particularly with enhanced packages.
What parts of the offer can be negotiated?
Several components of your redundancy package can typically be discussed:
- Ex-gratia payments - These discretionary amounts beyond statutory minimums are usually the most flexible element
- Notice period arrangements - Whether you work it, receive payment in lieu, or go on garden leave
- Bonus payments and commissions - Ensuring all performance-related earnings are included
- Share options or equity arrangements - Negotiating fair compensation for giving these up
- Reference wording - Securing positive future employment references
Employers often have predetermined formulas for voluntary redundancy. However, unless you attempt negotiations, you'll never discover their flexibility limits.
Tips for reviewing your redundancy package
First, examine your employment contract and any redundancy policies thoroughly, as these form the foundation of your entitlements. Keep detailed records of all communications regarding your redundancy.
Understanding employment law gives you a significant advantage. Identifying potential weaknesses in your employer's redundancy process can provide leverage for negotiations. Remaining calm and professional throughout discussions will generally yield better results than emotional reactions.
How tax and benefits may be affected
Your first £30,000 of statutory redundancy pay is tax-free. Any redundancy payment exceeding this threshold becomes taxable as income. Notice pay, holiday pay, and unpaid wages always attract tax and National Insurance deductions regardless of the overall package size.
How our settlement agreement lawyers can help improve your offer
Facing redundancy negotiations alone puts you at a disadvantage against HR professionals. Our experienced settlement agreement lawyers can identify additional negotiation opportunities you might miss. Our professional approach provides objective leverage when emotions run high.
Employers generally cover or make a substantial contribution towards legal fees for settlement agreement advice. We can review your redundancy terms, identify negotiation opportunities, and secure improved financial terms while protecting your future employment prospects.
What to Check Before You Sign
We recommend careful assessment of several critical elements before finalising any voluntary redundancy agreement. Taking time to review these key points will help protect your future interests and financial well-being.
Is the payment fair?
We advise comparing your offered package with statutory redundancy calculations based on your age, weekly pay, and years of service. Ensure the package includes all components you're entitled to—your salary until leaving date, notice pay, accrued holiday pay, and any performance-related bonuses or commission.
Your first £30,000 of redundancy compensation is typically tax-free. However, other elements like notice pay will attract tax and National Insurance deductions. Our team can help you understand how the payment structure affects your total take-home amount.
Are there any restrictions on future work?
We often find settlement agreements contain clauses limiting future employment options. These "restrictive covenants" might prevent you from:
- Working for direct competitors
- Approaching former clients
- Hiring former colleagues
In our experience, reasonable restrictions should last no longer than 3-6 months and must be narrowly defined geographically and by business activity. Overly broad restrictions may be unenforceable, particularly if they prevent you from finding suitable employment.
Are there confidentiality or non-compete clauses?
Most settlement agreements include confidentiality requirements restricting discussion of the terms or even the fact you signed one. Non-compete clauses specifically prevent working for competitors.
We will check these clauses allow you to:
- Disclose information to immediate family
- Consult with financial or legal advisors, such as settlement agreements solicitors
- Discuss matters with healthcare providers
- Respond to legal obligations
Do you fully understand your rights?
Our primary concern is ensuring you understand exactly what rights you're waiving. Settlement agreements typically prevent claims against your employer for issues like unfair dismissal, discrimination, or unpaid wages.
Legal advice from a settlement agreement solicitor isn't just a recommendation - it's legally required before signing. This ensures you fully comprehend what you're agreeing to. Your employer will usually cover these legal costs, making it important to take advantage of this opportunity to protect your interests.
Settlement Agreement Lawyers Can Help Protect Your Interests
Voluntary redundancy represents a significant career transition that requires careful consideration of both legal and financial implications. Throughout this guide, we've examined the differences between voluntary and compulsory redundancy, the components of your package, and the role of settlement agreements.
Your rights matter greatly when facing redundancy. While enhanced financial packages may appear attractive at first glance, we recommend examining all terms thoroughly—particularly those limiting future employment or containing confidentiality requirements. The first offer rarely provides the best possible outcome, and most elements can be negotiated with proper support.
Seeking independent legal advice from a settlement agreement solicitor isn't simply a legal requirement - it's your opportunity to secure fair treatment. Our team at Winston Solicitors can review your settlement agreement, identify areas for improvement, and negotiate better terms while safeguarding your future career prospects. Your employer will typically cover these legal costs, making professional guidance accessible when you need it most.
We encourage you to take sufficient time when considering any voluntary redundancy offer. Ask questions, request clarification, and avoid feeling pressured to accept terms that undervalue your contributions. With informed confidence, redundancy can become an opportunity for positive career change rather than a negative experience.
Our settlement agreement lawyers are committed to helping ensure your voluntary redundancy package reflects your true worth and protects your future interests. Contact our experienced team today for a confidential review of your settlement agreement.
